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.
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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.
