Carmaker Aston Martin (LSE: AML) is known for high prices and high speeds – but what about the British automotive marque’s shares?
In short, they have been a disaster. Since listing in 2018, Aston Martin shares have shed 99% of their value.
But there have been some rises along the way – including a sharp one over the past month. Could this potentially be the green shoots of share price recovery?
A dramatic gear shift
Specifically, the past month has seen the Aston Martin share price increase by 22%.
That means someone who put £9,500 into the carmaker just a month ago would now be sitting on a holding worth £11,590. Very racy.
There is no dividend, which is hardly a surprise as Aston Martin is heavily in debt and has ongoing high levels of negative free cash flow.
Still, the recent share price rise has been substantial. Despite that, the share still sells for pennies.
What’s going on?
That sort of uptick in share price is notable, especially given how horribly Aston Martin shares have done over a longer timeframe.
Interestingly, there has been no specific news from the company over the past month that could help explain why the share price has soared.
So I think this is basically the market chewing over the company’s results, which were published in late February, and reassessing whether it really is as much of a basket case as some in the City had previously assumed.
Balancing risk and reward
It might not be.
After all, Aston Martin has a strong brand and a deep-pocketed customer base that could be happy to keep splashing the cash even if the economy is not doing well.
The first Valhalla model supercars have now hit the road, potentially opening up chunky new revenue streams.
In addition, Aston Martin has been taking a close look at spending, which could potentially help improve its operational efficiencies.
Still, though I see some reasons to be cheerful, the question I have as an investor is: why rush?
To put that another way, why put my hard-earned money into what still looks like a very risky business rather than wait for it to prove itself more before deciding whether to invest, even if that means paying a higher price for it at that point?
After all, even if Aston Martin shares were to double or triple from here, they would still only cost a fraction of their price a few years ago.
Lots still to prove
The reason I am taking this approach is that despite having brilliant assets, the company has consistently been a source of disappointment for investors in recent years.
That could change. But I would rather wait for hard evidence of any such change rather than investing on the basis of hope alone.
If the shares cost more but the risks seem lower thanks to the business proving itself, that could still be much more attractive to me than the position today.
Fortunately, there is no shortage of other value shares in the UK market I think are potential bargains right now.
