Picture supply: Getty Photographs
A primary look on the efficiency of ITM Energy (LSE: ITM) thus far this 12 months is sufficient to make the guts sink. The ITM share worth is down 43% thus far in 2024.
I can’t say I’m very shocked.
Again in January, I wrote that “quite a bit stays to be accomplished and the corporate continues to be closely lossmaking. So, somewhat than purchase now, I’ll wait and look ahead to extra concrete indicators of a sustainably worthwhile enterprise mannequin.”
Trying again, I’m actually glad I didn’t purchase earlier than the share worth collapsed this 12 months.
Nonetheless, quite a bit has been going proper for the enterprise this 12 months. Certainly, at present (20 December) it introduced {that a} European hydrogen plant developer had signed on for a front-end engineering design contract for a 50MW website from ITM.
2024 has been a strong 12 months for the enterprise
That’s according to the corporate setting expectations that it has a rising gross sales pipeline and expects revenues for its present monetary 12 months to develop additional, after greater than tripling within the prior 12 months.
The corporate has been in a position to ramp up its gross sales, whereas specializing in a streamlined product portfolio and “tightly controlling” prices in delivering services and products.
These sound like fundamental strikes and certainly it’s what I feel a well-run enterprise would have been doing all alongside.
However I nonetheless see it as constructive that the corporate is continuous to develop its prime line whereas making strikes that ought to enhance its bottom-line efficiency, which for now stays within the crimson.
2025 may see the worth transfer up once more
So, provided that sturdy gross sales efficiency, improved price self-discipline and constructive income progress outlook, why has the ITM share worth carried out so poorly this 12 months?
The corporate continues to lose cash and burn money. Nevertheless, it has a good amount of money readily available – over £200m on the finish of October. Its present market capitalisation is £207m.
Whereas ITM could have burnt cash prior to now couple of months, that signifies that the market is now valuing the inexperienced vitality share at little greater than its money asset worth.
I reckon that makes it a possible discount. If the corporate can present that it has a workable enterprise mannequin that sees it making a revenue (even a small one) not a loss, I reckon the ITM share worth may leap. Doubtlessly that will occur in 2025, given the sturdy gross sales momentum going into the 12 months.
I’m more and more tempted to purchase
Trying merely on the money stability relative to market cap piques my curiosity. However the firm’s expertise can also be gaining industrial traction.
I really feel the ITM enterprise is transferring in the fitting path. I’m more and more tempted to purchase, as I reckon the share may transfer up in 2025.
Nevertheless, simply as ITM has its self-discipline on the subject of money outlay, so do I as an investor. For now the corporate stays closely lossmaking. I see an ongoing danger that the share worth may fall because it continues to burn money.
If the worth goes up from right here, the potential reward is engaging. However for now I stay uncomfortable with the dangers, so don’t plan to speculate but.
