There is a big focus on renewable energy sources currently as the world races to cut carbon emissions. One growth stock that could play a part is Ceres Power (LSE:CWR). I must admit I hadn’t heard of it until I began researching the sector for investment purposes some time ago. Should I buy Ceres shares?
Renewable energy technology
As an introduction, Ceres is a leading developer of fuel cell technology. These fuel cells help the production of clean, low-cost energy. It currently has one flagship product, known as Ceres SteelCell.
So what’s happening with Ceres shares currently? Well, as I write, they’re trading for 389p. At this time last year, the stock was trading for 998p. This is a 61% decline over a 12-month period.
The investment case
Let’s take a look at some bull and bear aspects of Ceres shares to help me make a decision on my position.
First of all, Ceres as a growth stock has lots of future potential ahead, in my opinion. There is lots of policy support from governments to find alternative, clean energy solutions. As well as policy support, there is a lot of money being thrown at this from the public and private sector. An example of this is Ceres’ partnerships to date. As a smaller firm, it may not have the financing and infrastructure in place yet to progress its product line. These partnerships will enable that, and could eventually translate into performance growth, and returns for shareholders.
It is worth noting that Ceres will make money from licensing fees from said partnerships. To date, it has some lucrative partnerships, including one with energy powerhouse Shell, another with Chinese firm Weichai, and South Korean firm Doosan Group.
Investor sentiment towards Ceres could certainly boost shares too as the rise of ethical investing (ESG) continues. Millennials for example are looking for businesses to invest in that are ethical and Ceres ticks this box.
Away from the positives, it is worth noting that despite Ceres’ share price fall, the shares do look expensive. I find this is common in a growth stock as the potential has not been realised yet, but there is some excitement around future potential. In addition to this, Ceres is yet to turn a profit. I do believe this could change imminently as some of its partnerships are set to yield licence fees in the coming fiscal year. I will keep a keen eye on future trading updates.
A growth stock I will continue to monitor
Taking everything into account, I’m going to keep Ceres Power shares on my watch list for now. Based on my research and due diligence, there is lots of potential ahead, and the market excitement and partnerships signed to date demonstrate this. For me personally, I want to see more meat on the bones from a financial and trading updates point of view, and for the business to become profitable for me to be able to truly understand how it could boost my holdings.