ASAN - Growing Fast but Burning Cash. Is This Stock a Buy?
Technology companies that generate revenue from software subscriptions have many attractive attributes that make them compelling investments. These businesses typically have high gross margins and can benefit from economies of scale. However, these same companies tend to spend many years unprofitable as they pour their revenue back into growing the business.
At some point, investors will want to see strong revenue growth and an increasing customer base start to translate into cash generation and profitability. How long to wait for that transition is the million-dollar question when evaluating these businesses within a stock portfolio. Asana (NYSE: ASAN) is one company that has been producing strong growth but burning a lot of cash, and its results from the first quarter of its fiscal 2023, which ended April 30, featured more of the same. So should investors buy now?
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Growing Fast, but Burning Cash. Is This Stock a Buy?