One exciting growth stock I reckon could fly high!

This Fool explains why this FTSE AIM growth stock could be on the cusp of soaring and whether she would buy the shares before it does.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

artificial intelligence investing algorithms

Image source: Getty Images.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

Sumayya Mansoor 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

Just released: November’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Young female analyst working at her desk in the office
Investing Articles

Here’s how I’d target a £23k second income with £300 a month

If I was building a shares portfolio today, here's how I'd go about it. With these strategies I stand a…

Read more »

Investing Articles

Tesla stock, MicroStrategy: here’s what Hargreaves Lansdown investors bought last week

MicroStrategy and Tesla stock were among the most popular investments last week as Donald Trump boosted markets with his election…

Read more »

Investing Articles

1 AI stock worth considering now Stocks and Shares ISAs are safe!

The Budget brought good news for those of us with Stocks and Shares ISAs! I’ve been looking at this one…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Growth Shares

Up 41% in 1 year, I’m buying more of this growth trust for my Stocks and Shares ISA

A great performance over the last 12 months has pushed our writer to buy more of a very exciting investment…

Read more »

Investing Articles

3 reasons to like the Legal & General dividend

Christopher Ruane explains a trio of reasons why he likes the Legal & General dividend as a source of passive…

Read more »

Investing Articles

Down 16%+, here’s 2 unloved FTSE 100 shares for savvy investors to consider!

These FTSE 100 shares have slumped in the past six months. Royston Wild thinks long-term investors should pay them close…

Read more »

Girl buying groceries in the supermarket with her father.
Investing Articles

Down 15%, but the FTSE 100’s J Sainsbury has a dividend yield over 5%!

Is it time to consider shares in FTSE 100 supermarket chain J Sainsbury for a potentially enduring stream of chunky…

Read more »