However, I want to spotlight two established companies here. While they’re both in the FTSE 250, they probably still fly under the radar of most investors today.

Growing global business

The first stock is Applied Nutrition (LSE:APN). This sports nutrition company only listed in late 2024 and currently has a £544m market-cap.

However, the firm is quickly making a name for itself, with shelf space secured for its products in Tesco, Asda, Morrisons, Sainsbury’s, and Holland & Barrett. Its Vimto-flavoured hydration tablets and isotonic gels are very popular.

Around 90% of revenue comes from business-to-business channels, including large retailers, gym groups, and international distributors it sells in bulk to. Indeed, over half of sales now come from overseas.

Globally, the sports nutrition and wellness market is booming, with younger generations seeing health and fitness as a core part of their lifestyle. As such, vitamins and supplements are increasingly part of their daily routine, as normal as brushing their teeth.

Therefore, I consider this sector to be moving more towards consumer staples. And many people are willing to pay a little more for quality, which is creating a big opportunity for Applied Nutrition’s trusted products.

For the current fiscal year ending July, the company’s revenue is expected to jump 31% to £140m. City analysts reckon it could reach almost £200m by 2029, with healthy profitability alongside.

Arguably the biggest threat to near-term growth is the Middle East conflict, which is still causing shipping disruption. Rising inflation (particularly for whey protein) could also pressurise margins.

On the other hand, I think the valuation’s reasonable, with a forward price-to-earnings (P/E) ratio of 17.8.

A final thing I like is that the company’s founder-led by CEO Thomas Ryder, who’s very ambitious to grow the brand’s trustworthiness globally.

Green economy shift

With its £1.3bn market-cap, Volution (LSE:FAN) is a larger FTSE 250 company. Its share price is up around 350% since listing in 2014.

The company designs and manufactures indoor air quality solutions. Revenue has more than doubled over the past five years, driven by the ventilation specialist’s acquisition-led growth strategy.

In the six months to 31 January, revenue rose 21.7% to £228.7m, with a solid 22.6% operating margin. And 72.1% of sales came from low-carbon products (like heat recovery systems), up from 68% the year before.

Now, the risk to growth is the struggling UK construction market, which is being held back by high interest rates and inflation. Any deterioration here, which can’t be ruled out, could present challenges.

Given this risk, I’m encouraged to see the firm diversifying its revenue base further with the acquisition of AC Industries in Australia. This move gives Volution exposure to the gold and copper mining ventilation sector.  

The stock also pays a dividend. While the forward yield of 1.9% isn’t much to write home about, the annual payout’s been growing between 9% and 20% in recent years.

Volution has strong long-term growth potential, with building regulations mandating better energy-efficient ventilation. Pair this with a reasonable forward P/E ratio of 17, and I think the stock’s worth considering as a green energy play.

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With no age restrictions on the Cash ISA or Stocks and Shares ISA, either, these products can be a great option for individuals seeking an early retirement. But how much money would someone need in them to draw a £30,000 annual passive income at age 55?

A 16-year ISA plan

Based on a drawdown rate of 4%, an individual would need £750,000 across their ISAs for a regular £30,000 second income to supplement their State Pension.

On paper, that appears like an enormous sum of money. But the experience of many investors shows it’s more than achievable with the right investing strategy and patience.

With a diversified portfolio of global stocks, I think it’s realistic to target an average annual return of 9%. That’s bang in the middle of the 8% to 10% return range that long-term investors have traditionally enjoyed.

If someone used their full £20,000 Stocks and Shares ISA allowance at the start of each year and achieved this return, they’d reach their target pot in 16 years. To be more precise, they’d have £765,804 sitting in their retirement fund.

There are bound to be bumps along the way. Stock prices can go up and down, while dividends can also be volatile. But with patience and time, the power of compounding can turn regular investing into serious long-term wealth.

A hot growth share

Holding a wide range of shares across sectors and regions can help smooth out any turbulence over time. There’s no right or wrong investing strategy, but I think owning a balanced mix of growth, value, and dividend shares can pay off over the long term.

Growth stocks can deliver strong returns as earnings take off and share prices follow suit. Value shares can also rise sharply in price as investors recognise their underlying worth. Dividend stocks can complement these by providing stability across the economic cycle through regular cash rewards.

Volution Group (LSE:FAN) is a FTSE 250 growth share that’s recently grabbed my attention. The business — which supplies ventilation systems across the UK, Continental Europe, and Australasia — has seen its shares rise a whopping 265% in the last five years.

What makes it worth attention is the considerable structural opportunities in its locker. Governments across its markets are tightening energy efficiency and air quality standards for new and existing buildings. The company also stands to benefit from rising housebuilding construction in its main UK market.

Sales to the commercial sector could weaken during economic downturns. But so far Volution has managed to navigate such pressures, with organic revenues at group level rising 5.7% in the 12 months to July, beating City forecasts.

As part of a diversified ISA portfolio targeting long-term returns, I think Volution shares are worth serious attention.

The post How much money do you need in an ISA to earn a £30,000 passive income at 55? appeared first on The Motley Fool UK.

This is a stock that I’ve owned in the past but sacrificed to consolidate my portfolio. Given this milestone though, now seems like an opportune moment to take another look. Should I rebuy it?

Happy anniversary!

Volution is a leading supplier of ventilation products for residential and commercial buildings. On 23 June 2014, it listed at an offer price of 150p per share, implying a market cap of £300m. At market close on 21 June, the share price was 454p, giving a market value of £908m.

This means the stock has increased by 203% — an excellent return.

But there’s more because Volution is healthily profitable and pays dividends. Factoring those in over this period, the total shareholder return has been 272%. This smashes the equivalent FTSE 250 return of 71%.

Why has the stock done so well?

In the short run, the market is a voting machine. But in the long run, it is a weighing machine.

Warren Buffett

Solid profitable growth is arguably the number one thing that firms are judged on by investors over time. After all, who wants to put money into a business that’s posting losses indefinitely? That’s a one-way ticket to oblivion.

Over this period, Volution has delivered a compound annual growth rate of 13.3% in revenue and 12.7% in adjusted earnings per share. Nice. Last year, the operating profit margin was around 17%.

As part of its growth strategy, it has undertaken 21 acquisitions across the UK, mainland Europe and Australasia. The company is now present in 17 countries and generates 60% of its revenue from outside the UK. I like this geographic diversification.

CEO Ronnie George commented: “Our successful track record is testament to our strong corporate culture, differentiated business model, compounding growth strategy and consistent delivery over the last decade.“

Strong environmental and regulatory tailwinds

The company’s purpose is to provide healthy indoor air sustainably. Today, 70% of revenue is derived from low-carbon products, a significant increase from 43% in 2014.

Over 30% of this revenue comes from heat recovery ventilation systems. These recover heat from outgoing exhaust air and transfer it to incoming fresh air. This reduces the energy needed for heating buildings in cooler climates, and should be a long-term growth market for the firm.

There’s also heightened global awareness around the importance of indoor air quality. For example, we now know the harmful effects of mould on health, which is driving increasing governmental regulation. So this is another growth tailwind.

My move

Looking forward, Volution’s energy-efficient building solutions are well-positioned to benefit from decarbonisation trends. However, the ventilation market is also competitive, with established players and new entrants all offering similar products.

Increasing competition could eventually squeeze profit margins, as could a spike in commodity prices, particularly steel. The construction industry is also cyclical.

Meanwhile, the stock is trading at 21.5 times trailing earnings, which looks a bit pricey to me. And the market’s only forecasting 4%-6% revenue growth up to 2026.

Weighing things up, I reckon there are better opportunities for my money right now.

The post This fantastic FTSE 250 stock turned 10 today! Is it a buy? appeared first on The Motley Fool UK.

Here’s why I’d be willing to buy some shares when I next have some investable cash.

Ventilation specialist

The business supplies ventilation products to residential and commercial customers. Some of its popular brands include Ventair, Diffusion, and Airtech, to name a few. From a geographical view, the firm operates across three segments: UK, Europe, and Australasia.

Volution shares have meandered up and down, like many FTSE 250 shares, due to economic turbulence. However, they’re up 1% over a 12-month period, from 412p at this time last year, to current levels of 419p.

Pros and cons

From a bullish view, the business has an excellent track record of performance. This includes growing margins, stable revenues, and profitability, as well as excellent free-cash flow to prop up a very strong balance sheet. However, I do understand that past performance is not a guarantee of the future.

Breaking down Volution’s most recent update, a half-year report released on 15 March, I was impressed. Some key takeaways for me were that revenue and profit before tax increased by 6.3% and 9.9% compared to the previous year.

Plus, despite inflation, the business managed to increase margin levels by over 1%. Also, Volution’s earnings-per-share shot up by 10.5%. Finally, the business hiked its interim dividend by a whopping 12%.

Speaking of returns, a dividend yield of 2% is enticing, and I reckon this could grow in line with the business. However, I do understand that dividends are never guaranteed.

Finally, keeping an eye on growth, I reckon there’s a potentially juicy opportunity for the business to progress. This is linked to new regulations to decarbonise buildings, especially in the UK, which is the firm’s largest territory based on revenue.

From a bearish perspective, the shares are a bit pricey on a price-to-earnings ratio of 20. Could any negative news or trading send the shares tumbling? Furthermore, is growth already priced in? Possibly so.

Another risk I’ll keep a close eye on is Volution’s propensity for acquisitions. To date, these have served it well, and helped it grow nicely. However, even one acquisition that doesn’t work out could have a disastrous impact on a firm’s balance sheet, shares, returns, and overall sentiment.

Wrapping up

I reckon Volution is a bit of an overlooked stock on the FTSE 250 index. Let’s be honest, this is probably because ventilation isn’t exactly exciting or cutting edge to most.

However, the investment case for me looks too good to ignore. This includes a great profile, track record of performance, growth prospects, and a passive income opportunity. All of these aspects are on my tick list when I’m assessing stocks to buy to help me boost my wealth.

The post Looking for FTSE 250 shares? Here’s one overlooked pick I’d love to buy! appeared first on The Motley Fool UK.

However, I believe the greatest growth can be found in identifying quality companies in the FTSE 250, as they may be smaller, with have more future potential.

I think Volution Group (LSE:FAN), while already becoming quite big, is of high quality, and has more growth to come.

Investing in ventilation

The firm offers ventilation products for both residential and commercial purposes.

One element of Volution Group that I really like is that it’s well-diversified around the world. It generates revenue from the UK and Europe as its core markets, but also from Australasia, and the rest of the world.

Global diversification is great because it means if there’s an economic downturn in one country, it can still generate growth in others.

Very profitable and stable

The business has some of the best margins in its industry, and they’ve only gone up recently. It took a bit of a knock in 2020 around the time of the pandemic. But now it’s back to being very strong in terms of profit:

What I like is that it has supported this high profitability with a stable balance sheet. That means to me that it’s should to be able to keep up its performance in the future.

The firm has been growing very well over the long term too. And analysts are expecting its revenue to continue to grow at a compound annual growth rate of 4.4% over the next three years.

Notable risks

Now, while I’m bullish on this company, I have read a risk report from Volution. Here are two of the most severe risks management has outlined.

First, the firm isn’t recession-resistant. A slowdown in the construction industry can severely affect Volution Group. The prime reason for this is that its products are largely bought during construction for installation.

Second, with an expansion strategy including acquisitions, the business may fail to integrate the companies it buys. In a worst-case scenario, its deals could actually cause a net loss rather than help to fuel growth.

An excellent choice for me

Even considering the risks, I think this business is a great find.

One final point I’m really impressed by is that while its earnings growth has been good over the past decade, its free cash flow growth has been phenomenal. It increased from 6.7% over the past 10 years annually, to 21.5% over the past five years, and 31.3% over the past year.

Free cash flow is an excellent measure of business growth. Profits can ebb and flow based on operational expenses, but free cash flow accounts for non-cash expenses. What this means is that expenses on the income statement are more accurately reflected on the cash flow statement in terms of cash produced or spent versus non-cash payments, asset appreciation or depreciation, and the like.

Based on the strengths outweighing the risks to me, I’ve put Volution Group on my watchlist for when I next invest.

The post This highly profitable FTSE 250 business looks like an excellent investment to me appeared first on The Motley Fool UK.

Ventilation business

Volution is a ventilation products and services business that caters to the residential and commercial sectors. Although ventilation doesn’t sound particularly exciting, there could be some lucrative times ahead, especially in the UK, which is where it makes most of its money. More on that shortly.

As I write, Volution shares are trading for 364p. At this time last year, they were trading for 309p, which is an 18% increase over a 12-month period. It is worth noting that many FTSE 250 stocks have suffered during the same period due to macroeconomic issues including rising inflation and interest rates.

The investment case

Volution has an excellent track record of performance. Although I’m aware that past performance is not a guarantee of the future, I can’t ignore its excellent growth and progress in recent years. Its most recent full-year results for the period ended 31 July 2023 were announced last week. Revenue and operating profit increased by 6.8% and 7.7% compared to the previous year. Furthermore, its dividend per share jumped by close to 10%. The Volution share price spiked on the back of these results. The business has grown revenue and profit for the past three years in a row now.

Speaking of returns, Volution’s dividend yield stands at 2.6%. This is higher than the FTSE 250 average of 1.9%. However, I do understand that dividends are never guaranteed.

What makes me believe Volution could be set for good times ahead is regulation to decarbonise buildings. In simpler terms, making the indoor air cleaner. This is a legal requirement, at least in the UK, so this should offer the business more opportunities to boost its coffers. Furthermore, it is acquiring businesses in its Australasia segment, to boost growth there. Both these aspects for the future outlook for the business also contributed to the shares jumping last week, in my opinion.

From a bearish perspective, Volution shares look a tad pricey right now on a price-to-earnings ratio of 19. Any negative news or poor trading could send the shares downwards.

Furthermore, Volution may find its acquisitions don’t work out. When this happens, it can be a costly mistake to repair. This process can impact its balance sheet, investor sentiment, and returns too. Finally, rising interest rates could hamper demand. These higher rates are impacting new buildings and purchases. With a lack of both of these things, Volution could find short-term demand for its products decline somewhat.

A FTSE 250 stock I’d buy

To conclude, Volution looks like a good stock to buy to boost my holdings. I’d consider adding some shares when I next have some cash to spare.

To me, Volution looks a well run business with a solid track record of performance, a passive income opportunity, as well as growth prospects ahead too. Its growing presence in other markets, aside from the UK where it is a dominant player, is exciting in my eyes.

The post Here’s why this impressive FTSE 250 stock could soar to new heights appeared first on The Motley Fool UK.

Let’s get straight to it

Volution (LSE:FAN) is the stock in question. It went public back in 2014 and manufactures ventilation equipment for both the corporate and residential sectors.

Trading at 380p, the share price is now up 21% over the past year. The main driver for the bump this morning came from the release of full-year results.

The short story is that the results were strong, hence the move higher. Revenue grew by 6.6% versus last year, with adjusted operating profit also up 7.7%. This meant that reported profit before tax increased from £47.2m to £48.8m.

Impressively, the compound annual growth rate of the earnings per share since the IPO stands at 12.7%. That’s a strong statistic and shows how well the company has done over the past decade.

The future looks bright

I don’t think that the numbers alone would be enough to justify the large share price move though. What has helped this is the outlook going forward. A large part of the growth this year came from regulation regarding decarbonisation of buildings to make indoor air cleaner.

This is now a legal requirement, and so I feel this is going to be the source of future revenue and profit for the company next year. It’s a huge issue that firms will need to comply with, whatever the cost.

The other part of the optimistic outlook comes from recent acquisitions. The firm bought DVS in
New Zealand just after year end. This adds to two other purchases of companies in Europe in the year. Naturally, the full benefit of integrating these businesses will take some time. So the uptick that this will provide should be seen over the next year or two, likely boosting results even further.

Mindful of interest rates

The CEO commented that “we are mindful of the impact of higher interest rates on consumer confidence and new-build construction.” This negative impact could mean that consumers decide to hold off on purchases, which will lower demand for Volution’s products.

This is a risk going forward, but I believe interest rates are close to peaking. If this is correct, then the issue should subside over the coming months. Don’t get me wrong, I don’t see rates falling quickly. But at least sentiment should improve in that people aren’t worried about not knowing how high rates could go.

On balance, I think the company could continue to perform well, especially with the favourable regulations. Investors would do well to consider adding this stock to a diversified portfolio.

The post Why this FTSE 250 stock skyrocketed over 10% this morning appeared first on The Motley Fool UK.

However, it also runs an investment trust that invests solely in UK growth shares. This is the Baillie Gifford UK Growth Trust (LSE: BGUK), a portfolio made up of its “best ideas“.

Here, I’m going to look at the trust’s top two holdings, as of 30 May.

Volution Group

The top position was Volution Group (LSE: FAN), a FTSE 250 stock that currently has a market cap of £707m.

The Crawley-based company makes air quality systems and heat pumps for residential and commercial buildings in the UK, Europe and Australia.

It has grown its earnings per share (EPS) at a compound annual growth rate of 19% over five years. And despite facing inflationary and supply chain pressures, the group’s adjusted operating margin is still surprisingly strong at around 20%.

One trend the firm is benefiting from is a growing public awareness of how much poor indoor air quality (especially mould and damp) can impact health. Management argues that this makes its air quality systems “far less discretionary” in nature, especially for its social housing customers.

Now, there’s a risk that further interest rate hikes to tackle inflation could push the UK economy into a recession. That might hit the firm’s sales.

I have a small position in the stock, but given the economic uncertainty, I wouldn’t feel comfortable making this a top holding.

Games Workshop

The trust’s second largest holding was Games Workshop (LSE: GAW). This is the creator of Warhammer, the most popular tabletop battle game in the world.

Games Workshop already has millions of loyal customers globally, but the numbers could multiply on the back of its partnership with Amazon Studios.

Announced in December, this deal is only agreed in principle so far. But it could see Warhammer 40,000 become a big-budget film and TV series. This would be a major coup for the Nottingham-based business in its ongoing attempts to monetise its vast intellectual property. 

However, this potential hasn’t gone unnoticed by investors who’ve driven the stock up 26.5% in six months. This puts the shares on a price-to-earnings (P/E) multiple of 27.5, which looks quite pricey to me.

So, while I own the stock, I’d rather wait for a possible pullback in the shares before adding to my position.

Would I buy Baillie Gifford UK Growth Trust?

Clearly, I’m not rushing to buy either stock. But would I buy the trust itself? Last week, the trust’s managers said they believe the portfolio has “attractive growth fundamentals and the vast majority of holdings are…high quality and resilient.”

Looking at the rest of the portfolio, which includes Experian, Ashtead and Diageo, I’d tend to agree. All appear to have solid long-term growth opportunities, at least to my mind.

But that’s a problem for me because they’re already in my portfolio, along with Games Workshop and Volution.

So, if I were to also invest in this trust, I’d be risking high levels of overconcentration. That could badly damage my returns if these shares were to underperform in future.

Having said that though, I’d consider the stock if I were building a portfolio from scratch today.

The post These are 2 of the UK’s best growth stocks, according to Baillie Gifford appeared first on The Motley Fool UK.

So, with this in mind, here are two stocks I own that I’m looking to add to as summer starts.

My FTSE 100 pick…

Ashtead (LSE: AHT) is an international equipment rental company that trades under the Sunbelt Rentals brand and operates in the UK, Canada and the US. Around 80% of its FY22 revenue came from the latter, where only United Rentals has a larger share of the equipment rental market.

While the US is undoubtedly a great market to be in long term, due to its sheer size and infrastructure spending, the immediate economic outlook there remains cloudy. Higher interest rates could deter new home buying and therefore construction. Consequently, overall rental demand could decline.

This uncertainty probably goes a long way to explaining why the share price is 23.5% lower than it was 18 months ago.

However, I’m taking the long view here. The US government has committed to significant increases in infrastructure spending over the next few years. There’s the Infrastructure Investment and Jobs Act, as well as The Inflation Reduction Act and The Chips and Science Act.

As a leading tool hire brand, Ashtead is incredibly well positioned to benefit from these construction mega-projects.

Meanwhile, the stock is trading on a forward price-to-earnings (P/E) multiple of 14. For a high-quality business continuing to gain market share in a fragmented rental market, I rate that as good value.

The dividend yield is modest at 1.4%, but the company is buying back $500m of its own shares between now and April 2024. The stock is currently at the top of my buy list.

…And a FTSE 250 stock

Volution Group (LSE: FAN) specialises in energy-efficient residential and commercial ventilation systems in the UK, Europe and Australasia. That’s everything from extractor fans to mechanical heat recovery units. It also sells non-ventilation products such as heated towel rails and radiators.

The stock is down 18.5% over the last 18 months as the firm has encountered inflationary and supply chain pressures. And while these challenges haven’t disappeared entirely, things seem to be looking up.

In the six months to 31 January, the firm’s revenue increased 8.5% year on year. All three regions grew organically while pre-tax profits rose 5.6% to £22.6m. Its adjusted operating margin weakened slightly, but at 21.1% it remains very healthy and above the group’s 20% target.

Impressively, its UK residential revenue increased 16% during the period. This was driven by “a very noticeable increase in demand in social housing”, according to CEO Ronnie George.

One big change here is that homeowners, landlords and tenants are becoming increasingly aware of the health dangers of underventilated properties, especially in relation to damp and mould. And social housing providers have been ordered by the government to upgrade their properties, which should continue to benefit Volution.

Analysts are expecting net profit of £42.8m for the firm’s current financial year (ending 31 July). At today’s price, that would put the shares on a fairly undemanding P/E multiple of 18.

I have a small position in this under-the-radar stock, but I’m keen to add more shares to my portfolio in June.

The post 2 FTSE stocks to buy in June appeared first on The Motley Fool UK.

But Volution Group (LSE: FAN) has caught my eye, having everything I’m looking for in a stock.

What does the firm do?

Founded in 2002, Volution manufactures and supplies ventilation products to residential and commercial construction markets in the UK, Europe and Australasia. That includes everything from simple extractor fans to more complex whole-dwelling ventilation systems. The company’s mission statement reads: “Our purpose is to provide healthy indoor air, sustainably.”

The firm has successfully expanded into Europe and Australasia via a number of bolt-on acquisitions. The group is now made up 19 key brands across three geographic regions. The UK accounts for around 38% of overall sales, Europe slightly less at 36%, with Australasia making up most of the rest.

Most of these markets remain fragmented, making them ripe for further consolidation. And Volution’s strong balance sheet should allow it to strategically acquire market share.

Strong results

Yesterday, the company reported strong results for the six months to 31 January. Revenue rose 8.5% year on year to £162.3m, while adjusted operating profit was up 7.1% to £34.2m. Pre-tax profit rose nearly 6% to £22.6m. There was organic growth in all three geographic regions.

Chief executive Ronnie George, who’s been at the helm since 2012, noted that homeowners and landlords have been addressing mould and condensation issues. Rising energy bills caused people to reduce heating, causing air quality issues. This helped its UK residential arm grow revenue by 16% during H1.

At 21.1%, the firm’s adjusted operating margin remained above the 20% target set by management. And the interim dividend was increased 8.7% to 2.50p per share. The yield is modest at 1.86%, but the payout has compounded at a five-year growth rate of 12%.

Looking forward, management noted that inflationary and supply chain challenges are easing. And with homeowners, landlords and tenants increasingly aware of the dangers of under-ventilated properties, Volution’s future looks bright to me.

The stock now trades at 17 times consensus forecast earnings. It should be noted that this is higher than the index average, which could present a level of valuation risk. But at 394p, the shares do remain 30% off the 560p price reached back in September 2021.

Environmental trends

A recent report from Imperial College London found that the UK’s 28.6m homes are among the least energy efficient in Europe. They lose heat up to three times faster than on the continent, which makes people colder and ultimately poorer.

This situation will need to be properly addressed by government at some point, particularly as homes account for 30% of the UK’s total greenhouse gas emissions. Again, all this should benefit Volution, with its market-leading range of energy-efficient residential heating systems.

I’m buying the stock

Volution is closely aligned with powerful environmental, health and regulatory trends. It’s growing nicely, both organically and via acquisitions, and there’s a rising dividend underpinned by strong financials.

As a result, I’m ready to tuck some shares away in my ISA for the next few years.

The post 1 magnificent FTSE 250 stock I’d buy right now! appeared first on The Motley Fool UK.