Storming back?

When a stock has fallen out of favour as badly as this one, it can take a number of things to get it back on track. And right now, it looks as if they might be coming together.

Invinity makes vanadium flow battery systems used for stationary energy storage. They tie in nicely with the needs of solar, wind and other renewable energy production. Nature tends not to follow a daily business schedule, so energy from these sources is anything but steady.

The world might have shelved its low-carbon pledges for now. But in the long term, things still have to change.

Broker sentiment

Broker sentiment’s bright. It’s the only stock I’ve seen recently where all the analysts offering a rating have it as a Buy. But before we get too excited, there are only three of them. Still, their average price target of 70p is 250% ahead of today.

Even the least bullish sees a 100% gain to 40p. And that leaves one super optimist expecting 105p for a five-bagger. So why isn’t everyone already piling in and pushing the price way up closer to these targets?

Well, nothing’s ever that good. And the number one drawback with Invinity Energy is a lack of profit. Yes, it’s jam tomorrow again. But here’s where things might be coming together further.

Profit soon?

Analysts forecast a profit in 2027. It would only be a tiny one, so it could easily miss. But a profit is a profit. In terms of timing, it really couldn’t squeak in much tighter. The company reported net cash on its books of £32.4m at the end of 2024 following a funding round.

That should keep it going for a little while yet… until some time in 2027, according to the forecasts. That’s when they expect the company to swing into net debt of close to £1m. So the predicted profit, if it comes off, could be just in the nick of time.

With FY 2024 results, CEO Jonathan Marren spoke of “the significant shift we are currently observing across global battery markets towards the next generation of energy storage technologies and I firmly believe we are in a strong position to take our place at the forefront of this shift.“

Competition

This is a very competitive business, but I do see room in the market for a number of winners — though it’s by no means sure Invinity will be one of them.

Still, I rate the chances of long-term technological success highly. The short-term danger is that the money will run out, the company will need a new fundraise, and investors who buy now will see their holdings diluted.

Should we consider buying on the hope of some potentially serious growth? I’m thinking of it, perhaps with just a small amount of money.

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Down in the dumps

I’m on about Invinity Energy Systems (LSE:IES). The stock is down 50% over the past year, meaning that it has a market cap of £94m and a share price of 21p,

Let’s get the bad news out of the way first. One reason why the stock is down so heavily is that the business continues to be loss-making. In the last full-year results, the firm lost £18.54m, with revenue of just £2.94m.

Even though the business is getting money through the door from the sales of energy storage systems, it has high costs of operating. Since the business has been losing money for the past five years, there’s clearly some concern from investors about whether it’ll ever make money.

This becomes a slippery slope for the share price, as more investors throw in the towel and sell, which causes the stock to fall even further.

Reasons for optimism

What really caught my eye was the latest half-year results that came out late last year. They detailed how revenue surged to £14.8m, a 10 times increase from the same period of the previous year.

This related to the successful delivery of products to three major clients, including one in Canada, one in Australia and one in the US.

The update was also very positive regarding the outlook, with the company in the process of launching a new system known as Mistral. The report explained how it has already secured large orders for this, which includes funding from the US Department of Energy.

In the short term, operating costs will remain high as it seeks to have the staffing levels to process the orders. Yet ultimately the jump in revenue shows that demand is there and that the future could be bright.

Risk, but reward

I get why the stock hasn’t rallied yet. Investors want to see proof that the business can turn a profit, not just get revenue through the door. Yet from my perspective, the jump in revenue is the logical step to be followed by profitability.

If the business can maintain revenue growth over the next year, I’d expect the firm to turn a profit in 2024. Future speculation is a risk, and this is a volatile penny stock that we’re talking about. But I’m seriously considering adding a small amount of it to my portfolio for a potential rally in the coming year.

The post After halving in value, I think this penny stock is ready for a comeback appeared first on The Motley Fool UK.

Yet the rewards of investing in sub-£1 shares can also be stratospheric. Some of the world’s largest companies like Apple, AMD and Ford grew from fledgling businesses to the stock market heavyweights of today. And early-stage investors became stinking rich in the process.

Here are two top penny stocks I think could also deliver titanic returns.

Invinity Energy Systems

Energy storage businesses have a vital role to play in the growth of renewable energy. Power generated from wind turbines and solar panels is rarely constant. So technology is needed to store the energy during good times to prevent the possibility of power outages.

This is where Invinity Energy Systems (LSE:IES) comes in. This penny stock produces vanadium flow batteries (or VFBs), a superior kind of storage system. These are safer, more cost-effective and have better durability that lithium-ion batteries. Therefore demand for them is tipped to soar.

Analysts at Consegic Business Intelligence, for instance, expect the global VFB market to expand at a compound annual growth rate of 19.5% between now and 2030.

Invinity continues to rack up contracts from across different sectors. So far in 2023 it has sold 14.4 MWh of its batteries to customers in the US, Canada and Australia. In another positive sign the firm has just announced that its ‘Mistral’ next-generation product prototype will be deployed in British Columbia, Canada early next year.

On the downside, lithium-ion batteries have lower upfront costs than VFBs. So companies could decide to plump for these older technologies instead during this period of high economic uncertainty. But a bright long-term outlook still makes Invinity an attractive stock to own today.

DP Poland

Food delivery business DP Poland’s (LSE:DPP) stock also has the potential to deliver spectacular investor profits over the next decade.

The company is best known as the master franchisee of the Domino’s Pizza brand in Poland. It operates an extensive delivery operation as well as a portfolio of 116 restaurants. More recently it also expanded into Croatia to bolster its customer base.

These regions are ripe for rapid growth due to low food delivery market penetration and increasing personal incomes. Indeed, DP Poland’s trading update in May illustrated the massive sales potential of these emerging markets.

In its core Polish market, like-for-like system sales leapt 18.4% in the first four months of 2023. On a comparable basis sales in Croatia also rose an impressive 15.7% year on year.

High food price inflation presents an ongoing risk to takeaway businesses like this. But in a boost to near-term earnings the firm encouragingly announced that food costs have recently shown “a positive downward trend.”

Helped by the strength of the Dominos brand, I expect DP Poland’s share price to soar from current levels as profits climb.

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Buying penny shares, however, could also give investors access to a growth hero of tomorrow. And this has the potential to turbocharge the returns made over the long term.

To Invinity and beyond

Investing in shares that play a role in the ‘green economy’ is one way investors can try to make big profits over the next decade.

I’ve sought to do this by buying renewable energy stock The Renewables Infrastructure Group. I have also invested in TI Fluid Systems, which makes lots of components for use in electric cars. I’m considering buying shares in penny stock Invinity Energy Systems (LSE: IES) too.

This UK share makes energy storage technology that ensures a constant stream of power supply. Energy production from renewable sources can fluctuate wildly according to when the wind blows and the sun shines. Invinity’s tech then can help prevent power outages from occurring.

Demand for the stock’s product, therefore, could rise strongly as the number of renewable energy farms across the world grows. But I like Invinity in particular because of its focus on vanadium flow batteries (VFBs).

Vanadium batteries

Lithium-ion batteries are the most widely used and therefore represent a threat to other technologies like VFBs. However, I’m backing interest in Invinity’s batteries to snowball given their superior durability, safety and long-term cost effectiveness.

Latest trading news from the company this week was highly encouraging on this front. Revenues soared almost 700% year-on-year in 2021, to £3.2m. And its sales pipeline had soared 152% between 2 November and 25 May to stand at 714.2 MWh.

Invinity plans to supercharge production over the next couple of years to keep sales soaring too. It’s why broker VSA Capital thinks revenues will rise more than fourfold to £14.1m in 2022 and then to £20.6m next year.

Risk vs reward

It’s important to acknowledge that Invinity isn’t tipped to turn a profit over the next 18 months at least. This can create higher risk for an investor, as share placings or taking on debt can be used by loss-making companies to soothe liquidity problems.

On balance, though, this is something I’d be happy to accept with Invinity. In my opinion, the potential rewards investors could receive more than make up for this risk.

Research suggests that the global VFB market will be worth $592.4m by 2026. That’s more that double the $237.5m that the industry is estimated to be worth today. If everything goes to plan then Invinity Energy Systems could have a big role to play in this rapidly growing market.

The post A top penny stock to buy in July appeared first on The Motley Fool UK.

This particular company doesn’t actually produce power from renewable sources. But the energy storage technology it creates allows a constant source of electricity from intermittent sources like wind and solar.

Its technology is therefore essential for the widespread adoption of renewables. Our need for power doesn’t change according to whether the sun is shining or the wind is blowing. Invinity’s vanadium-based batteries allows producers to store, regulate and release electricity when conditions aren’t favourable for producing energy.

The bear case

Vanadium batteries aren’t the only way that renewable energy can be stored. Lithium-ion energy storage is also highly popular and this poses a threat to Invinity’s profits potential. 

It’s important to note too that Invinity is yet to turn a profit. And City analysts don’t think the business will move into the black until 2023 at the earliest. Any delays on this front could prove disastrous for the tech firm’s share price, and particularly if it means extra additional shares are issued to fund its work.

The bull case

Still, I’m highly encouraged by recent news flow that suggests Invinity’s route to profit remains on track. A few weeks ago, it successfully installed and energised the first part of the so-called Energy Superhub Oxford project’s flow battery. The battery will be the UK’s largest flow battery with a capacity of 5MW when finished. Completion is expected by the close of the year.

 The company’s sales pipeline continues to grow strongly and, as of mid-September, was up 18% from levels recorded since mid-May. As brokers at Canaccord noted, the pipeline is also double the levels reported since redT and Avalon merged to create Invinity Energy Systems in March 2020.

My verdict on this renewable stock

Like any UK share, Invinity carries its share of risk. Development problems can arise at any moment and competition in the energy market is huge and likely to keep growing.

That said, I think there’s a lot to like about this particular renewable energy stock. Project execution has so far been impressive, and customer interest in Invinity’s energy storage systems is growing rapidly. Analyst research suggests that the vanadium battery market will keep expanding quickly too. Analysts at Researchandmarkets.com think the vanadium redox battery market will be worth $4.8bn by 2027, up from just $235m last year.

Vanadium flow batteries have a longer life, are cheaper over the cost of the project, and are found to be safer than lithium-based equivalents. This is what could give Invinity the edge against its rivals offering non-vanadium technology and pave the way to explosive profits growth.

I think this renewable stock could help me make some sparkling returns in the coming years.

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Against this backdrop, it’s no surprise that responsible investing — Environmental, Social and Governance (ESG) — is booming. According to M&G’s Pru brand, some 46% of its clients have shown an interest in ESG investing, with one in two saying their appetite for sustainable investments (such as renewable energy stocks) has grown since the Covid-19 outbreak.

Describing the “dramatic” growth in the popularity of ESG investments, M&G said the trend “has largely been fuelled by the climate emergency, growing scrutiny of company practices”. It also noted that “some governments [were] adopting carrot and stick policies to change consumers’ and companies’ behaviours in line with their commitments to the international community”.

The FTSE 100 firm also said the pandemic “has prompted a re-evaluation of ‘what matters most’.” This has prompted a change in investors’ financial priorities and has certainly boosted my interest in responsible investing.

5.4% dividend yields!

There are a number of top renewable energy stocks I’m looking to buy to ride the ESG train. One of these is Greencoat UK Wind (LSE: UKW), an investor in onshore and offshore wind farms across the country. The FTSE 250 company has a strong track record of acquisitions and its appetite for splashing the cash remains undimmed. Kepler Trust Intelligence notes that Greencoat UK Wind has “a significant pipeline of assets that it has committed to buy”.

This UK share will play a critical role in helping the government reach its goal of carbon neutrality by 2050. And despite the threat that operating in a highly-regulated environment brings, I think stock investors like me could do well with it in the process.

One final reason I love Greencoat UK Wind — today, this renewable energy stock boasts a 5.4% forward dividend yield.

Another top renewable energy stock I’d buy

Invinity Energy Systems (LSE: IES) isn’t involved in the business of producing green energy. But its role as a manufacturer of vanadium flow batteries still makes it an exciting renewable energy stock to buy.

Energy storage systems like Invinity’s are essential in the production of wind, solar and tidal energy. They can capture generated energy and distribute it when the wind stops blowing and the sun stops shining. This ensures a constant supply of power.

Lithium-ion batteries are hugely popular for this purpose, but vanadium-based ones are quickly growing in popularity. This is due to their superior durability, greater safety profile, and better cost effectiveness over the life of a project. This explains why Invinity’s commercial opportunity pipeline increased an impressive 30% between early March and late May. That said, the vanadium flow battery market is likely to face intense competition from iron flow batteries going forward.

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