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

So far, 2023 has been dramatic ITM power (LSE: ITM). A new chief executive announced plans to reshape the renewable energy company too much loss-making dramatically. ITM Power shares are up 17% since the start of the year.

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

Price movements

If I had bought shares at the end of the trading day three years ago (well, three years ago tomorrow is the closest trading day), they would have started to fall 18% in value. But if I had bought them at the beginning of the same day, I would have dropped only 8%. That still falls, but less steeply.

Why such a swing in one day? February 2020 was a dramatic month for the stock market – and that included ITM’s share price. The lowest share price was 83p and the highest was £1.71. In other words, the high point is more than twice the low point in one month (and the shortest month!)

So, if I had bought at some point in February 2020, I could now be sitting about three years later with a 38% gain or a 33% loss, depending on exactly when I bought. In other words, my £3,000 share could now be worth £4,140 – or just £2,000.

ITM Power shares and volatility

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

With a more focused strategy and good technology, it can remain volatile and the stock will advance quickly. That could be in either direction, though.

Zero dividends

I will not receive the dividend of ITM Power share holders for the last three years because the company has not paid them.

In fact, I would be very surprised to see the dividends from ITM Power over the years. Over the past three years, the company has made a post-tax loss of £94m.

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

So before paying the dividend, I expect it to be profitable and with positive free cash flow on an operating level. If that happens, I don’t expect it in the next few years.

I will wait and see

Now the lack of profitability or even a proven profitable business model means I won’t be buying ITM Power shares for my portfolio.

If the new strategy works, sales increase, and losses are cut or eliminated altogether, the stock could rise in the next three years.

But things are far from certain. I can end up losing money if I buy now and tank shares. So before I move, I will wait and see how the ITM business goes in the next few years.