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FTSE AIM incumbent ITM Energy (LSE: ITM) has skilled a little bit of a roller-coaster experience up to now few years, from hovering heights to more moderen lows.
May now be the time to snap up cheaper shares with a view to a turnaround because the sentiment in direction of renewable power is garnering extra consideration and significance?
Let’s take a better have a look at current developments to assist form my funding case.
Hydrogen-based renewable power options
ITM manufactures hydrogen-based power options that may assist with grid balancing and power storage companies. That is nice for the manufacturing of unpolluted gasoline for transport, renewable warmth, and chemical compounds.
So what’s been occurring with the ITM share worth? As I write, the shares are buying and selling for 61p. Right now final yr, they have been buying and selling for 110p, which is a 44% drop over a 12-month interval. Extra tellingly, the shares as soon as traded for 682p in January 2021, which is a 91% drop to present ranges!
My funding case
When ITM soared, its thrilling new expertise captured the market’s consideration. Nevertheless, the analysis and growth section has confirmed to be very completely different to the manufacturing section. The latter is the place the enterprise has struggled, inflicting the shares to tumble sharply. Efficiency was lacklustre, it under-estimated money wanted, and prolonged order delays all mixed to harm ITM.
So the place will we stand in the present day? Properly, an interim replace launched final week confirmed some indicators of promise. A 12-month technique to overhaul the agency’s future appears to be paying off. Income got here in at £8m, greater than quadruple the identical interval final yr. EBITDA was nonetheless within the detrimental, however considerably higher than final yr. Extra crucially, money ranges improved its steadiness sheet massively, which might assist safe ITM’s future. Value efficiencies and narrowing its product portfolio is an ongoing endeavour and will assist the enterprise transfer ahead.
Primarily based on the above, I’m not shocked that ITM shares spiked 17% in early buying and selling when the replace got here out. Nevertheless, there are nonetheless some pink flags for me. The enterprise continues to be loss-making, and there appears to be no revenue in sight, which is worrying for a possible investor like me.
I discover my curiosity in ITM piqued by current developments. Renewable power alternate options and sentiment is about to soar within the coming years. If the enterprise can get its home so as, and begin turning a revenue, shopping for shares now may very well be a savvy transfer.
What I’m doing now
Regardless of the higher replace in comparison with others in current occasions, I’ve determined I received’t make the leap and purchase any shares simply but.
The constructive replace and strategic evaluate appears promising on the floor of issues. Nevertheless, I have to be taught extra concerning the route of the corporate and its monetary well being transferring ahead. An absence of revenue and continued losses is the largest subject for me. Plus, the speed at which the agency spends cash is a fear.
I’ll put ITM shares on my watch checklist for now, and maintain an in depth eye on developments.