Many long-term investors in ITM Power (LSE: ITM) will have done incredibly well. Those who had the foresight to buy the shares almost five years ago and sell early in 2021 would be sitting on gains of around 2,100%. Since then, the tide has turned. The ITM share price is now roughly 42% below where it stood at the end of January. Will June’s trading update change things? And should I take advantage of the price drop?

ITM: The story so far

Let’s recap. ITM is a highly promising hydrogen energy storage and clean fuel company. Put simply, analysts believe the element — and the AIM-listed business — could play a huge role in decarbonisation (returning levels of CO2 in the atmosphere to more natural levels).

Back in 2015, ITM signed an agreement with Shell for hydrogen refuelling stations. A couple of years ago, this was extended to include forms of transport such as buses, trains and ships. In 2019, the company also announced a joint-venture with engineer Linde to deliver renewable hydrogen to industrial projects across the globe. 

In more recent news, ITM revealed that it had signed a collaboration agreement with (and received strategic investment from) Italian energy infrastructure firm Snam. Other developments include the opening of a gigafactory in Sheffield.

The ITM share price: where next?

The quick answer to where the share price is going is that no one knows for sure. A slightly more involved response is that it really depends on whether the company meets, beats or falls short of investors’ expectations on 10 June. Despite recent operational progress, the last of these is clearly possible. 

Back in January, ITM reported results for the six months to the end of October. For me, two numbers stood out. The first was a 92% drop in revenue to just £200,000, partly due to Covid-19 disruption. The second was a 28% rise in the adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) loss to £10.4m. Despite recent investment helping accelerate the company’s growth strategy, things could get worse before they get better.

Even if ITM shareholders accept this, more general market moves could still have a bearing. Right now, investors are shunning growth for value. This could prove problematic for the ITM share price’s near-term performance.  So, even better-than-expected news in June (thanks to the lifting of restrictions) may not change the stock’s trajectory. The company’s low free float — the number of shares available to trade — could also amplify any fall. Of course, the opposite is also true.

Not for me….yet

The potential for hydrogen-focused companies is massive. Unsurprisingly, ITM thinks its “rapidly developing backlog and tender pipeline” is evidence of its “world class” offering. 

I’m keeping my feet on the ground for now. Let’s not forget that the advent of the internet saw many companies coming to the market only to quickly disappear following the dotcom bust. A similar scenario may play out here. ITM could well prove to be one of the victors, but there can be no guarantee. When hype meets reality, the latter wins eventually.

Taking my own risk level into account, buying a clean energy fund remains the best strategy for me. This way, my money is spread across many companies rather than just one. Options here include the Invesco Global Clean Energy ETF or my favourite, iShares Global Clean Energy ETF.

The post Where will the ITM Power share price go in June? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in iShares Global Clean Energy ETF. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Quarto is an illustrated book publisher and distributor, with a market cap of around £50m, and it’s just released full-year results that beat expectations. With adjusted pre-tax profit up 18%, adjusted earnings per share rose 13%, and the total dividend of 9.5p per share is 6% ahead of last year and yields 3.8% — and it’s covered 3.4 times by earnings. Net debt was cut by 10% too, which is a good sign, with chief executive Marcus Leaver telling us that the firm intends to “steadily reduce net debt further“.

Forecasts suggest two years of EPS growth at 11-12% per year, which would put the shares on a P/E multiple of under seven for 2016, dropping to just six on 2017 forecasts, and would provide PEG ratios of around 0.6. That suggests good growth value to me, and on these fundamentals I’d say Quarto is looking attractive.

Solar power

Shares in PV Crystalox Solar (LSE: PVCS) perked up 4% in early trading to 9.7p, after full-year results revealed an increase in revenues from €53.3m to €64.5m. The company makes photovoltaic silicon wafers, used for capturing solar energy, and it’s been suffering from weak pricing. But chief executive Iain Dorrity told us that the price of wafers “has shown some modest recovery during recent months while the price of polysilicon, the key raw material, has fallen to historic lows“, and that wafers can now be sold at more than their cash cost of production.

The company still widened its loss for the year and is extending a strategic review of its business in what are still difficult trading times. Vernalis had net cash of €12.7m on its books at the end of December, albeit down from €24.6m a year previously and possibly close to the limit if it suffers a further loss in 2016. But analysts are expecting just about break-even. It sounds like 2016 could be a pivotal year — and if demand for solar energy is on the rise, we could be at a good (if risky) buying point.

Medical recovery

My third candidate today is pharmaceuticals firm Vernalis (LSE: VER), whose first-half results led to a 12% drop in the share price to 52p. The shares soared to 87p back in September 2015 on the back of hopes for the firm’s Tuzistra XR cold treatment, but since then shareholders have been hit with a 40% fall.

Interim results showed a revenue increase to £6.1m from £5.7m, with Tuzistra XR contributing £0.6m to that — and it represents the direction the firm is going in the “major transformation in our business” described by chief executive Ian Garland, to specialize in cough and cold treatments.

There’s no annual profit forecast yet, but predicted losses per share are tumbling and the four brokers offering an opinion have Vernalis as a ‘strong buy’. It’s another risky one, but if profitability can be achieved by 2018 then we might be on to a winner.

The post 3 Small Caps Set To Soar: Quarto Group Inc, PV Crystalox Solar PLC, Vernalis plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.