3 high-growth AIM stocks I’m backing for 2023

Edward Sheldon highlights three AIM stocks he owns going into 2023. All are profitable and growing at a fast pace.

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Over the years, I’ve had a fair bit of success with growth stocks listed on London Stock Exchange‘s Alternative Investment Market (AIM). In this area of the UK stock market, there are a lot of exciting companies that are growing at a fast pace. Here, I’m going to highlight three AIM stocks I’m backing for 2023 and beyond. All three are benefiting from powerful trends, and have significant long-term growth potential, in my view.

A top UK tech stock

Let’s start with Cerillion (LSE: CER). It’s a small British software company that provides billing, charging, and customer relationship management solutions, predominantly to telecommunication companies.

Cerillion is benefiting as telecom companies undergo digital transformation and shift their operations to the cloud. For the year ended 30 September, revenue was up 26% to a record £32.7m. Meanwhile, adjusted profit before tax was up 40% to £11.9m.

Looking ahead, the company said that it is well positioned for further growth this financial year and beyond.

The market backdrop remains extremely favourable. The roll-out of 5G and digitisation, and the need to be able to react rapidly to changing market conditions, means that telecom companies continue to drive investment in enterprise software. These tailwinds should help to support Cerillion’s continued expansion over the longer term,” said CEO Louis Hall in the group’s full-year results.

Now, Cerillion shares aren’t cheap. Currently, the price-to-earnings (P/E) ratio is in the low 30s. This high valuation adds risk.

However, I’m comfortable with this multiple as the P/E-to-growth ratio (PEG) ratio is not overly high.

A 5G company

Next up is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

This is another AIM company with a lot of momentum right now. For the six months to 30 September, revenue was up 38% year on year to £12.7m. Earnings per share came in at 2.8p, up 36% year on year.

One thing Calnex has going for it right now is the rollout of 5G technology. This is creating a high demand for network testing services. Growth in the cloud computing and data centre markets is also driving demand for testing products and services.

There are a few risks to be aware of here. One is component shortages. Another is the P/E ratio, which is in the high 20s.

All things considered however, I like the risk/reward proposition heading into 2023. I may buy more stock soon.

Electric vehicle exposure

Finally, I’m also backing Volex (LSE: VLX). It’s a UK-based provider of power cords and cables.

One reason I’m bullish here is that the company manufactures charging products for the electric vehicle (EV) market (and works with some major players in the industry). This market has huge growth potential. For the six months to 2 October, revenues from Volex’s EV segment were up 53% year on year.

Another reason is that the valuation is quite low. Currently, the forward-looking P/E ratio here is under 12.

The stock is not perfect, of course. One risk I’m monitoring is debt on the balance sheet, which has risen on the back of recent acquisitions.

But, overall, I see a lot of investment appeal. If I didn’t already have a substantial position here, I’d be buying more shares today.

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.

Ed Sheldon has positions in Calnex Solutions Plc, Cerillion Plc, and Volex Plc. The Motley Fool UK has recommended Cerillion Plc. 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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