A FTSE AIM stock I’d add to my Stocks & Shares ISA in July

Henry Adefope highlights a FTSE AIM stock he believes could generate significant upside for his portfolio if he buys this month.

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I consider the AIM market to be the most successful growth market in the world. In 2015, just three companies listed on it had a market cap greater than £1bn. Today there are 30. Those figures are too attractive for me to ignore. And after some thorough research, I have identified an AIM stock I think is worth adding to my Stocks and Shares ISA portfolio this month. I think it could potentially double my money over the next year.

My attraction to the AIM stock market

My recent attraction to the AIM market stems from my difficulty in finding capital growth at a cheap price anywhere else. The main market is so efficient that it is nigh on impossible to find undervalued shares that other analysts may have missed. If there are any companies out there with good growth prospects there is a good chance that I will find them on AIM.

One such company is specialist foreign exchange provider Argentex (LSE:AGFX), an AIM stock that I believe can provide me with high growth potential at a cheap price.

A penny stock with capital growth potential

The company is a simple business for modern times. It helps businesses and wealthy individuals handle their foreign exchange requirements. It is a disrupter aiming to take market share away from the banks by offering a better, cheaper service. This represents fertile ground for sustained growth.

It has grown its revenue and profit every year since it floated a decade ago, demonstrating resilience and sustainability. Even during times of economic turmoil like the pandemic its customer demand remained consistent.

Not only is the company profitable, it is also debt-free with £23m of net cash at the end of September 2021.  

In addition, Argentex continues to expand internationally despite the choppy market environment. The strategy appears to be working. Client numbers increased by 20% year on year according to its most recent trading update.

Analysts expect earnings to grow more than 35% this year and the next. Yet, despite the ambitious forecasts, the shares trade on a multiple of just 11 times. This looks cheap to me compared with its peer, JIM Jarvis Securities, which trades on a multiple of 16 times.

Are the shares trading below fair value?

Just a year ago, Argentex shares were trading at around 125p, but they have since fallen to under 80p. I am surprised the stock has fallen out of favour with investors. It seems an unfair price for a company with continued profit margin and revenue growth.

Even City analysts believe the stock is currently trading at 40% below fair value, with the view that a price of £1.32 better reflects the stock’s prospects. I am inclined to agree.

My ISA portfolio is relatively volatile currently, and there seems no end to this anytime soon. The knock-on effect of this volatility has been a rather brutal decline to my fund value. Many of the large-cap technology growth stocks that generated the greatest capital returns in my portfolio in the recent past have been some of my worst performers this year.

I have had to look further afield for the prospect of growth, and Argentex is just one example of an AIM company with incredible growth prospects and a modest price.

Based on its stellar future prospects, the shares have the potential to double in price over the next year alone. This is why I may buy this month before I miss the dip.

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 considered so you should consider taking independent financial advice.

Henry Adefope 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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