It has been a depressing 5 years for shareholders in renewable power firm ITM Energy (LSE: ITM) and the share price has tumbled 73% throughout that interval.

May issues worsen from right here, or would possibly this be a discount price at which so as to add the share to my portfolio?

Enterprise efficiency is getting significantly better

In January the corporate launched its interim outcomes.

Revenues for the primary half grew 74% to £15.5m and the corporate recorded a contract backlog of £135m. It has signed a number of gross sales contracts because the interval below overview ended.

Not solely that, however on the finish of October, internet money was £203m. within the months since then I anticipate it’s got smaller. Nonetheless, the present market capitalisation of £175m is definitely under what the corporate forecast its money place could be when its monetary yr ends subsequent month.

In different phrases, the market is successfully now putting no worth on the corporate’s enterprise together with its spectacular hydrogen power storage expertise.

With the finance boss dipping into her personal pocket final month to purchase some shares, I’m questioning whether or not at its present price ITM is perhaps a discount for my very own portfolio.

There’s one massive query I nonetheless have

With revenues rising, I believe ITM has a basis on which it might construct and succeed.

Greater turnover can assist soak up mounted prices, an vital step for an organization because it grows and seeks to maneuver from heavy losses to breaking even. If it could possibly break even, I reckon the share price might transfer far above the place it stands in the present day, probably again to the place it was and even past.

However regardless of that, I’m not prepared to speculate but.

The rationale for that’s easy: profitability. It has lengthy been elusive for ITM — and that continues to be the case.

Sure, the corporate’s interim outcomes included distinctive gadgets, which made factor worse than they could be in future. Nevertheless, even earlier than these distinctive accounting gadgets, the loss from operations was as unhealthy as within the prior yr interval. At £20.7m, it was very vital (and considerably bigger than revenues).

ITM’s technique of specializing in sure product traces and thoroughly controlling prices, mixed with larger gross sales, should imply that losses get smaller. That will occur over time, however the first-half efficiency was not reassuring on this rating.

The actual fact stays that this can be a closely loss-making enterprise that continues to bleed money. Till it proves that its enterprise mannequin might be worthwhile, I don’t plan to speculate.

I’m taking a cautious method

If that occurs, the ITM Energy share price might leap, that means I would wish to pay extra to speculate than if I purchase now.

That doesn’t hassle me, as I see dangers in shopping for in the present day provided that ITM has nonetheless not confirmed the long-term viability of its enterprise mannequin to my satisfaction.

As soon as it does, it might benefit a better share price. For now, I believe it deserves a sizeable danger premium.

For my part, that helps clarify why the inventory market is successfully valuing the enterprise at zero for now.