Growth stocks come in all shapes and sizes. I often think that they fall into a few different categories in terms of what they do and offer. One example is a business offering something unique or niche. Another is something pretty common or universal, that is experiencing heightened demand now, and potentially for years to come.
Two stocks I’d happily buy when I next can, that fall into these categories, are Games Workshop (LSE: GAW) and Central Asia Metals (LSE: CAML).
Games Workshop
Tabletop gaming is very niche, and a far cry from traditional video games. Games Workshop has cornered its respective market, through its popular Warhammer series. In fact, it’s grown into a multi-billion pound enterprise through amazing organic growth.
Such has been the success of the business, it ventured out into many different avenues, eventually including video games, and more.
With such brand power, comes phenomenal pricing power. The business now boasts close to 40% operating margins. Plus, it has managed to grow revenue at an average pace of 14.5% year on year. Mighty impressive, if you ask me. Although, I do understand that the past is not a promise of the future.
The shares trade on a price-to-earnings ratio of 24, which isn’t sky high for arguably one of the FTSE’s best growth stocks, in my view. However, it’s worth noting that a higher valuation is a risk. If negative trading news or other issues hit the firm, the shares could drop. I’d keep an eye on this risk.
Finally, a dividend yield of 4.5% could grow in line with the business. However, I do understand dividends are never guaranteed.
As the name suggests, the business specialises in copper and zinc mining, with its own mines in Kazakhstan and North Macedonia.
The demand for these types of metals is surging, as they are key components for major infrastructure initiatives including electric vehicles (EVs), the green revolution, and more. This is good news for the business and potential shareholders and earnings and returns could be boosted here.
The major risk with Central Asia Metals is the cyclical nature of the prices of copper. This fluctuation could result in performance meandering up and down, and impacting returns. I must admit this external risk and a lack of control for the business in terms of pricing power makes me a tad uneasy.
A smaller – yet still noteworthy risk – is that of operational issues in mining locations that could hurt production levels, and output. If this were to occur, sales, earnings, and investor returns could be impacted negatively. However, it’s worth noting that this is a risk for all mining and commodities businesses.
Moving back to the good stuff, a whopping dividend yield of close to 9% makes the stock more attractive. Furthermore, the shares look decent value for money to me on a price-to-earnings growth ratio of 0.5. Any reading under one often indicates the shares are undervalued.
Overall I reckon Central Asia Metals is primed for huge growth. Buying some shares now to capitalise could be a savvy move, hence the reason I’ve got my eyes on the stock.
