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That’s no secret Rolls-Royce stocks have been a fantastic investment in recent years. After taking the tank in 2020, they have shot incredibly well. The question is – who will it be The next one Rolls-Royce?
It can be clean energy Power of ITM (LSE: ITM), facing similar price pullbacks at the moment?
A game changing deal
It’s an exciting time to be an investor in ITM Power. This is because the company – which mainly works on green hydrogen solutions – has a lot of momentum.
For example, last month, it signed an agreement with the European Defense Powerhouse Rheinmetall. This will see the company deploy several hundred production plants for the Giga PtX project of Rheinmetall, where the aim is to establish a Europe-wide network of synthetic fuel plants to strengthen the resilience of defense forces.
This deal – which puts the rocket below its share price – looks like a game-changing moment. That’s because it gives the group an opportunity to roll out its green hydrogen solutions at scale.
Another important development
The deal is one of many the company has signed recently. Some include:
- A 10 year Long Term Service Agreement with MorGen Energy for the West Wales Hydrogen project, to provide maintenance and support for the operational facility.
- Agreement with Octopus Energy Generation to operate its NEPTUNE V green hydrogen systems Kimberly-ClarkNorthfleet manufacturing plant in Gravesend, Kent.
- NEPTUNE V Basic Design Engineering Package contract with project industry client in Australia.
- NEPTUNE V Front-End Engineering Design contract for a project in Canada, aimed at producing hydrogen for transportation from hydroelectric power.
All these have come in the last six months. And they significantly increased the company’s stock price.
ITM Power vs Rolls-Royce
The key difference between ITM Power and Rolls-Royce however, is profit. In the last few years, the latter has jumped significantly due to the reform plan that was started in early 2023. For example, last year, the group’s operating profit was £3.5bn compared to £2.5bn the previous year. This has been the main price driver as it has pulled investors back.
In contrast, ITM Power is still unprofitable. And analysts don’t see the company’s bottom line turning black in the coming years. This can limit its appeal to the bottom line as institutional investors tend to avoid unprofitable companies because they are often too risky. This, in turn, could limit its share price growth.
Another difference worth mentioning is the measurement. When Rolls-Royce was near its bottom, it had a sales price of less than one, meaning it was really cheap. Today, ITM Power’s price-to-sales ratio is approximately 38. That means it’s actually more expensive.
So it may not be the ‘next Rolls-Royce’.
Is it worth the look?
That said, ITM Power shares may still be worth considering as a speculative investment. It clearly has viable clean energy technologies and if it can continue to win deals and grow revenue, its share price may continue to rise.
‘Guess’ is the key word here though. This is the kind of stock that could double or triple from here… or drop 80%-90%.
