[Update: Volex was bought for the Club on 2nd December 2020 at a price of £2.72]



Volex (LON:VLX) was once regarded as a turnaround situation but now it is an acquisitive growth stock helmed by executive chairman and c25% shareholder Nat Rothschild, who has just bought more shares at 253p.

The group's stock price reflects quite a change of fortunes under new management, with strategic acquisitions successfully moving Volex up the value curve and paving the way for sustainably higher margins and cash generation.

This continued evolution away from recovery mode into a higher margin, cash generative global player aligned with structural growth end markets like data centres and medical devices is central to the pitch. It was presented to the Stockopedia Investment Club on 17 November.

Has the easy money been made here, or, with additional acquisitions on the horizon, is there more to come from this ambitious company?

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TL;DR

Bull Points: Revenue growth and margin expansion; selective acquisitions in a fragmented global market; growing economies of scale and purchasing power; aligned with structural growth markets (medical devices, EVs, data centres).

Bear Points: Risky acquisition strategy and adjusted results; CFO has just left; scope for rising input prices (mainly copper); history of equity dilution.

Profile

Volex is an Adventurous Mid Cap High Flyer listed on Aim in the Industrials sector. It makes reliable cables for medical devices, data centres, electric vehicles, and domestic appliances.

Its share price is 261.7p, there are 152,250,802 shares in issue, and the market cap is £398.4m. The StockRank is 93, based on a Quality Rank of 92, a Value Rank of 37, and a Momentum Rank of 98.

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Volex has a forecast PE of 15.5x and the forecast PEG is just 0.6x, meaning strong growth prospects justify a forecast PE ratio in the teens.

The forecast yield is small, at 1.33%, but is an important milestone in the group's ongoing recovery and transformation. With that forecast PEG of 0.6, Volex is very much a 'GARP' ('growth at a reasonable price') stock with earnings expansion fuelled by organic investment and careful acquisitions in a fragmented market.


Business & Model

What is the company history & what does it do?

The original business was established in Manchester in around 1892 and the 'Volex' brand…

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