Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So, the natural question for SmartRent (NYSE:SMRT) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is SmartRent's Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. When SmartRent last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth US$142m. In the last year, its cash burn was US$41m. So it had a cash runway of about 3.5 years from December 2024. A runway of this length affords the company the time and space it needs to develop the business. We should note, however, that if we extrapolate recent trends in its cash burn, then its cash runway would get a lot longer. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for SmartRent

Is SmartRent's Revenue Growing?

We're hesitant to extrapolate on the recent trend to assess its cash burn, because SmartRent actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. Unfortunately, the last year has been a disappointment, with operating revenue dropping 26% during the period. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years .

How Hard Would It Be For SmartRent To Raise More Cash For Growth?

Since its revenue growth is moving in the wrong direction, SmartRent shareholders may wish to think ahead to when the company may need to raise more cash. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Since it has a market capitalisation of US$204m, SmartRent's US$41m in cash burn equates to about 20% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

So, Should We Worry About SmartRent's Cash Burn?

Even though its falling revenue makes us a little nervous, we are compelled to mention that we thought SmartRent's cash runway was relatively promising. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. An in-depth examination of risks revealed 1 warning sign for SmartRent that readers should think about before committing capital to this stock.

Of course SmartRent may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.