If I’d invested £3,000 in ITM Power shares 3 years ago, here’s what I’d have now

Would buying ITM Power shares in February 2020 have made our writer a paper profit or loss? The answer could be either! Here’s why.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

So far, 2023 has been dramatic for ITM Power (LSE: ITM). A new chief executive announced plans to reshape the heavily loss-making renewable energy company dramatically. ITM Power shares have moved up 17% since the turn of the year.

But as a long-term investor, my preferred timeframe for an investment is measured in years not weeks. If I had spent £3,000 on ITM Power shares three years ago, what would they now be worth?

Price movements

If I had bought the shares at the end of the trading day three years ago (well, three years ago tomorrow as that was the closest trading day), they would since have fallen 18% in value. But if I had bought them at the start of that same day, I would be down only 8%. That is still a fall, but a less steep one.

Why such a swing in a single day? February 2020 was a dramatic month for the stock market — and that included the price of ITM shares. The share price was as low as 83p and as high as £1.71. In other words, the high point was more than double the low point within the space of a single month (and the shortest month at that!)

So, if I had bought at some point in February 2020, I could now be sitting around three years later with either a 38% gain or a 33% loss, depending on exactly when I had bought. In other words, my £3,000 worth of shares might now be worth as much as £4,140 — or as little as £2,000.

ITM Power shares and volatility

As the above numbers suggest, these shares have experienced periods of high volatility.

With a more focussed strategy and good technology, it could be that they remain volatile and the shares move sharply in future. That could be in either direction, though.

Zero dividends

I would not have received any dividends owning ITM Power shares over the past three years as the company has not paid any out.

In fact, I would be very surprised to see any dividend from ITM Power for many years to come. Over the past three years in total, the company had made post-tax losses of £94m.

On the cash flow front, net cash outflows at the operating level have been £70m, while what the company terms ‘cash burn’ has been £114m. The company has raised cash by selling more shares.

So before it pays any dividends I would expect it to be profitable and with a positive free cash flow at the operating level. If that ever happens, I do not expect it to be in the next few years.

I’ll wait and see

For now the lack of profitability or even a proven profitable business model means I will not be buying ITM Power shares for my portfolio.

If its new strategy works, sales ramp up, and the losses are trimmed or even eliminated altogether, the shares could move up in the coming three years.

But those things are far from certain. I could end up losing money if I buy now and the shares tank. So before making a move, I will wait and see how ITM’s business performs in the next several years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »