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FTSE AIM incumbent ITM Energy (LSE: ITM) has skilled a little bit of a roller-coaster trip up to now few years, from hovering heights to newer lows.
May now be the time to snap up cheaper shares with a view to a turnaround because the sentiment in the direction of renewable vitality is garnering extra consideration and significance?
Let’s take a better take a look at latest developments to assist form my funding case.
Hydrogen-based renewable vitality options
ITM manufactures hydrogen-based vitality options that may assist with grid balancing and vitality storage companies. That is nice for the manufacturing of fresh gas for transport, renewable warmth, and chemical substances.
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 part has confirmed to be very totally different to the manufacturing part. 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 right this moment? Effectively, 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 destructive, however considerably higher than final yr. Extra crucially, money ranges improved its steadiness sheet massively, which may assist safe ITM’s future. Value efficiencies and narrowing its product portfolio is an ongoing endeavour and will assist the enterprise transfer ahead.
Based mostly on the above, I’m not stunned that ITM shares spiked 17% in early buying and selling when the replace got here out. Nevertheless, there are nonetheless some crimson flags for me. The enterprise remains 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 latest developments. Renewable vitality alternate options and sentiment is ready 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 latest occasions, I’ve determined I received’t make the leap and purchase any shares simply but.
The constructive replace and strategic evaluate seems promising on the floor of issues. Nevertheless, I must study extra concerning the course of the corporate and its monetary well being shifting ahead. A scarcity of revenue and continued losses is the largest difficulty for me. Plus, the speed at which the agency spends cash is a fear.
I’ll put ITM shares on my watch record for now, and hold an in depth eye on developments.
