Did ITM Power's Share Price Deserve to Gain 73%?

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

One simplest way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the ITM Power Plc (LON:ITM) share price is up 73% in the last three years, clearly besting than the market return of around 34%.

See our latest analysis for ITM Power

Given that ITM Power didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

ITM Power's revenue trended up 24% each year over three years. That's much better than most loss-making companies. While the compound gain of 20% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at ITM Power. If the company is trending towards profitability then it could be very interesting.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

Take a more thorough look at ITM Power's financial health with this freereport on its balance sheet.

A Different Perspective

While the broader market gained around 1.4% in the last year, ITM Power shareholders lost 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5.9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

If you like to buy stocks alongside management, then you might just love this freelist of companies. (Hint: insiders have been buying them).

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.