As I continue to look for shares to bolster my holdings to help me build wealth, one growth stock that caught my eye is Volex (LSE: VLX). There could be some exciting times ahead. Let me explain why and what I’m doing now!
Power and connectivity
Volex is essentially a manufacturing business. What it manufactures excites me. This includes products needed for power and connectivity such as cables. Furthermore, its range of products seems to have many real world applications that could soar in demand in the coming years.
Before diving into the investment case, let’s look at Volex’s recent share price performance. Over a 12-month period, the shares are up 22%, from 250p at this time last year to current levels of 305p.
The investment case
The products Volex manufactures can be used in several sectors, many of them tipped for growth. This diversification is a plus point. One application is for charging electric vehicles (EVs), as well as connectivity for data centres, and consumer electronics. The former is an exciting aspect, if you ask me. The rise of EVs is ramping up, and Volex recently signed a lucrative partnership with Tesla to help provide charging solutions. This could help boost the firm’s performance, sentiment, and returns.
Next, Volex’s worldwide reach and operations are a major positive for me. The firm has nine operational locations throughout the world. This could help position the firm for excellent exposure to many markets, and help boost growth.
Finally, Volex shares look decent value for money on a price-to-earnings ratio of 16. Furthermore, the shares would boost my passive income with a dividend yield of 1.3%. I reckon this level of return could grow, in line with the business. However, I’m conscious dividends are never guaranteed.
Moving to the bear case, Volex is at the mercy of economic volatility, as most manufacturing businesses are, due to their cyclical nature. A downturn could hurt demand, performance, and sentiment.
Another risk I’ll keep an eye on the firm’s propensity for acquisitions, which has helped it grow to date. Acquisitions are great when they work to boost presence and growth. However, when they don’t quite work out, they can be very costly to dispose of. In turn, any disposal could impact Volex’s balance sheet, sentiment, and growth plans too.
My verdict
To conclude, I definitely think there’s an opportunity to join Volex’s potentially exciting growth journey ahead. I’d be willing to buy some shares the next time I have some spare cash.
Volex’s fundamentals look attractive to me, as does its performance and growth track record. For example, I can see it has grown revenue and profit consecutively in recent years. However, I am conscious that past performance is never a guarantee of the future.
Finally, its recent partnership announcement with Tesla is just the icing on the cake for my investment case today. It signals to me the intent of a business on the cusp of soaring in the long term.
