My top growth stock for a Stocks and Shares ISA

This growth stock has all the qualities this Fool is looking for in a Stocks and Shares ISA investment to buy and hold in the years ahead.

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The tax-efficient nature of a Stocks and Shares ISA makes it the perfect vehicle to own growth investments, in my opinion. Indeed, any income or capital gains earned on assets held within an ISA are not liable for tax. With that in mind, here is one of my favourite growth stocks on the market right now that I would acquire for my ISA. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Top Stocks and Shares ISA buy 

The growth stock I would buy for my portfolio is Renew Holdings (LSE: RNWH).

This company provides engineering services, and helps maintain critical UK infrastructure assets. Key focuses are the rail and energy markets including the nuclear industry. 

This level of specialism gives the outfit a competitive advantage. It also is set to benefit from increased infrastructure spending over the next couple of years.

The government has outlined plans to spend tens of billions of pounds over the rest of the parliament on infrastructure projects. Rail and road projects will lead the charge. There is also a significant amount of cash flowing into new nuclear projects. 

Unfortunately, this tailwind does not guarantee the company’s growth. It faces significant challenges such as rising wages and materials costs. These could hit profit margins, which tend to be razor-thin in the construction industry. If there is a sudden deterioration in the economic outlook, the organisation may also see a higher number of loan defaults from customers. 

Even after taking these challenges into account, I think the outlook for the growth stock is incredibly encouraging. According to its latest trading update, the company’s order backlog at the end of 2021 totalled £742m, up from £677m in the same period last year. That is equivalent to around one year of revenues. 

Growth stock 

As the UK economy continues to recover from the pandemic, I expect demand for the corporation’s services will rise. 

City analysts expect the company to report earnings growth of around 11% for 2022. This puts the stock on a forward price-to-earnings (P/E) multiple of 13.8. It also offers a dividend yield of 2.3%. 

Considering this income and the company’s growth potential over the next couple of years, I think it would make a great addition to my Stocks and Shares ISA.

There could also be the potential for merger and acquisitions activity.

Rising costs could force engineering and construction businesses together to lower costs and try and improve economies of scale. Considering Renew’s niche market position, I think the firm could make an attractive acquisition target, although this is just speculation on my part. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. 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.

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