ITM Power (LSE: ITM) shares have had a great run recently. Over the last three months, ITM Power’s share price has risen more than 150%. Over the last year, it’s surged around 800%.
After that kind of stunning performance, ITM Power shares are now getting plenty of attention. But is the AIM-listed stock worth buying today? Let’s take a look at the investment case.
What does ITM Power do?
ITM Power is a clean-fuel company that specialises in hydrogen energy solutions. Those solutions are designed to take excess energy from the power network, convert it into hydrogen, and then use this form of clean energy in a wide range of applications.
In October last year, the company entered into a 50/50 joint venture (JV) with multinational chemical company Linde – a world leader in industrial gases and engineering. This JV will focus on delivering green hydrogen to large-scale industrial projects.
A renewable energy play
ITM Power certainly appears to have a lot of potential, in my opinion. In a world that’s increasingly focusing on sustainability and climate change, renewable energy is undoubtedly the way forward. So ITM should benefit from powerful tailwinds in the years ahead.
The market for ITM’s hydrogen solutions appears to be vast. For example, hydrogen energy can be used to refuel electric cars, buses, and trains. It can also be used to help provide heating and cooling to our homes. Additionally, it can be used in industries such as mining and steel production to make processes more environmentally-friendly and safer.
Overall, ITM appears to have an exciting future. Partnered with Linde, the company looks well-placed to benefit from the shift towards renewable energy, in my view.
Risks to be aware of
That said, there are a number of risks to be aware of here. For a start, ITM Power isn’t yet profitable. The company is generating revenues however, it’s still losing quite a bit of money.
For example, the group’s most recent half-year report showed a loss from operations of £9.8m, up 85% on the loss of £5.3m the year before. Meanwhile, the company recently advised it’s expecting an expected EBITDA loss for the year ended 30 April of £17.5m. I tend to steer clear of unprofitable companies these days as I’ve found, over the years, they often end up being poor investments.
Secondly, after the strong rise in the share price, the company now has a formidable market capitalisation. When the market closed on Friday, ITM’s market-cap was a lofty £1.5bn. Given that sales last year were just £4.6m, that seems high to me.
It’s also worth pointing out that ITM insiders have been offloading shares recently. Last week, CEO Graham Cooley, CFO Andy Allen, CTO Simon Bourne, and executive director Rachel Smith all sold shares. This could be interpreted as a bearish signal – it suggests they believe there’s limited upside potential in the near term.
Are ITM Power shares worth buying today?
Weighing everything up, ITM Power shares look a little too risky for my liking. The company certainly looks to have potential. However, given it’s not yet profitable, I see it as a high-risk speculative play.
All things considered, I think there are better stocks to buy right now.
Edward Sheldon has no position in any 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.