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Even when a business is losing money, it’s possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

Given this risk, we thought we’d take a look at whether Marks Electrical Group (LON:MRK) shareholders should be worried about its cash burn. In this report, we will consider the company’s annual negative free cash flow, henceforth referring to it as the ‘cash burn’. We’ll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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You can calculate a company’s cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Marks Electrical Group last reported its September 2025 balance sheet in November 2025, it had zero debt and cash worth UK£1.5m. Looking at the last year, the company burnt through UK£3.1m. That means it had a cash runway of around 6 months as of September 2025. Notably, however, analysts think that Marks Electrical Group will break even (at a free cash flow level) before then. If that happens, then the length of its cash runway, today, would become a moot point. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Marks Electrical Group

Marks Electrical Group boosted investment sharply in the last year, with cash burn ramping by 65%. While that’s concerning on it’s own, the fact that operating revenue was actually down 6.6% over the same period makes us positively tremulous. Considering both these metrics, we’re a little concerned about how the company is developing. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Marks Electrical Group revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company’s cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year’s operations.

Marks Electrical Group’s cash burn of UK£3.1m is about 6.2% of its UK£49m market capitalisation. Given that is a rather small percentage, it would probably be really easy for the company to fund another year’s growth by issuing some new shares to investors, or even by taking out a loan.

As you can probably tell by now, we’re not too worried about Marks Electrical Group’s cash burn. In particular, we think its cash burn relative to its market cap stands out as evidence that the company is well on top of its spending. While we must concede that its cash runway is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. It’s clearly very positive to see that analysts are forecasting the company will break even fairly soon. Considering all the factors discussed in this article, we’re not overly concerned about the company’s cash burn, although we do think shareholders should keep an eye on how it develops. Taking an in-depth view of risks, we’ve identified 1 warning sign for Marks Electrical Group that you should be aware of before investing.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.