One growth stock I’m excited about is Ashtead Group (LSE: AHT). As well as growth potential, I noticed Ashtead shares have been flying in recent years. Let’s take a closer look at whether or not I should buy some shares.
Ashtead shares on a great run
Ashtead is one of the world’s largest equipment rental businesses, with more than 400 depots across the US, UK, and Far East. It provides firms with equipment such as forklifts, excavators, and much more.
So what’s happening with Ashtead shares? As I write, they’re trading for 5,584p. At this time last year, they were trading for 4,312p, which is a 29% increase over a 12-month period. It has outperformed the FTSE 100 index in which it resides, which is down by 2% over the same period.
Looking back further, Ashtead has seen its share price soar in recent years. Over a five-year period, it has risen by close to 150%. Looking back even further, over a 20-year period it has risen by over 46K%, which is remarkable.
A growth stock with risk and reward potential
Ashtead is an established business with consistent performance history and a great presence in a few lucrative markets. It makes most of its money in the US, via its Sunbelt Rentals subsidiary. This is where I believe the growth can come from. President Biden’s $1trn infrastructure bill will mean lots of investment into updating roads, bridges, and other transit systems. Ashtead is in a prime position to benefit and grow earnings and boost investor returns, in my opinion.
One of the biggest risks Ashtead could face is that of economic issues in the US. Current issues including soaring inflation and rising interest rates have led to the US Federal Reserve tightening its belt. Although the bill mentioned earlier has been passed into law, there could still be some issues ahead in terms of the funding being released. I’ll keep a close eye on developments.
Right now, Ashtead shares look decent value for money to me right now on a price-to-earnings ratio of 17. Furthermore, the shares would boost my passive income with a dividend yield of 1.5%. Ashtead also has an excellent record of growing dividends in the past. However, I do understand that dividends are never guaranteed.
Another issue I’ll keep an eye on is Ashtead’s acquisitions. Although acquisitions are good to grow a business and boost market share, when they don’t work out, it can be a costly exercise to repair the damage. This can impact investor returns and sentiment.
A growth stock I’d buy
To conclude, I believe Ashtead could be a shrewd addition to my holdings. I’d be willing to buy some shares when I next have some spare cash. An enticing valuation, great prospects for the future, as well as a passive income opportunity helped me make my decision.
I believe Ashtead could continue its great share price growth trend from years gone by, especially if the infrastructure bill bears fruit and Ashtead can capitalise.
