When I last covered UK growth stock Volex (LSE: VLX) in March, I was bullish. At the time, it was trading near 430p and I saw it as cheap given its AI-related growth.
Fast forward to today, and the stock’s trading near 610p – over 40% higher – so I was right to be bullish back then. The thing is though, it continues to look cheap, so it could still be worth a look.
Volex provides mission-critical digital solutions
Volex is a British industrial company that specialises in high-performance power and connectivity (data transfer) solutions. Operating 23 manufacturing sites worldwide, it’s focused on five key areas:
- Complex Industrial Technology: Products for data centres, robotics and automation, aerospace/defence/space, and industrial manufacturing.
- Electric Vehicles: Components for EV charging.
- Medical Devices: Components for diagnostic imaging and patient monitoring systems and surgical equipment.
- Consumer Electricals: Products for everyday electronics in homes.
- Off-Highway: Ruggedised power and interconnect solutions for off-highway vehicles in industries such as defence, mining, agriculture, and infrastructure.
Now, all of these segments have potential. All offer a long-term growth story too. But the Complex Industrial Technology division is worth highlighting, because data centres are a huge opportunity for Volex.
Business momentum
This was highlighted in a recent trading update, posted in late August. In this update, the company told investors that it was off to a “very strong start to FY2027” with profit expected to be ahead of market expectations.
For the four-month period ended 31 July, the company generated 28% organic revenue growth at constant currency. A key growth driver here was the Complex Industrial Technology division – data centre demand was high.
The stock looks cheap
Given this operational momentum, I reckon the stock’s worth a look today. As I said at the top, it still looks cheap.
With analysts expecting earnings per share of 49.7 cents for the financial year ending 31 March 2027, the forward-looking price-to-earnings (P/E) ratio is only 16. That’s an undemanding valuation for a company with exposure to the data centre buildout that’s growing at a healthy rate.
Two other attractions
Looking beyond the data centre growth story, another attraction is that the stock just moved from the Alternative Investment Market (AIM) to the Main Market. This should lead to demand from a broader range of investors and FTSE 250 inclusion at some stage.
One other thing worth highlighting is the fact that CEO Nat Rothschild owns about 26% of the company’s shares. So his interests are aligned with those of shareholders.
An opportunity?
Of course, there are risks that could derail the bull case. One is an AI spending slowdown (the data centre pushback is an issue to monitor). Another is failed acquisitions. This is a company that regularly acquires complementary businesses.
Overall however, I like the set-up at current levels and believe it’s worth considering for an ISA or Self-Invested Personal Pension (SIPP). To my mind, this stock offers a cheap way to play the AI boom.
Should you invest £5,000 in Volex Plc right now?
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Edward Sheldon does not hold any positions in the companies mentioned.
