There’s a FTSE 250 growth share that keeps slipping through my fingers, and it’s driving me mad. Anglers will know the feeling – it’s the one that got away.
I’ve had a few over the years, but this one really hurts. I’m talking about family-run engineering group Goodwin (LSE: GDWN).
I last wrote about Goodwin for The Motley Fool on 28 September, saying it was the first share I’d buy if markets dipped. Back then, I thought I’d missed the boat. Since then, the boat’s not only sailed, it’s powered off into the sunset.
Goodwin is a real whopper
Goodwin has been a remarkable long-term performer. Founded in 1883, the Stoke-on-Trent-based family firm has built a global business around engineering precision parts for the defence, energy and industrial sectors.
Roughly 70% of sales now come from overseas, with 18 manufacturing sites across Europe, Asia, Africa and the Americas.
That international spread gives it exposure to faster-growing markets and a cushion against local slowdowns. Over the past 20 years, total returns have exceeded 4,600%, and the family still runs the business with an eye on the next generation, not the next quarter.
I planned to buy the stock before its results on 30 July but bungled my timing. Holidays got in the way, and by the time I checked, the shares were rocketing after profits jumped 47% to £35.5m on revenue of £220m. Defence and nuclear markets were booming.
I told myself to stay patient, as shares often retreat after good results. Not this one. Instead, Goodwin has delivered one positive update after another, sending the stock almost vertical.
Explosive share price gains
On 24 September, Goodwin announced a major submarine partnership with US defence contractor Northrop Grumman. Then, on Monday (27 October), the board dropped another ‘bombshell’, a profit upgrade and a special dividend.
Management now forecasts trading profit before tax to top £71m, compared to £35.5m last year. The company also declared a one-off interim dividend of 532p a share. Its order book has climbed to £365m, with visibility on several new defence and nuclear contracts still to come. Ouch, that hurts.
In the three months since I hesitated, the shares have climbed 149%. Over 12 months, they’ve soared 210%. Over five years, they’re up an astonishing 595%. It’s turning into the next Rolls-Royce story, just with less fanfare. And without me on board.
High expectations
Is it just getting started? I suspect it may slow from here, trading on a hefty price-to-earnings ratio of around 63. I could be wrong though. With a market cap of £1.54bn, it still has room to grow.
Any disappointment would hit the stock hard. Recent strength stems from the booming defence sector, so if the longed-for peace unexpectedly breaks out in Ukraine, sentiment could ease and orders slow. I already hold BAE Systems and Rolls-Royce, so I’m cautious about further exposure.
Investors might consider buying if they believe the momentum will last, yet I’m wary. But really, I’m not the man to ask.
Still, spotting Goodwin early shows my research was sound. I can see other big fish across the FTSE 100 and FTSE 250 today. I just need to hook them before they wriggle free.
