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Growth stocks come in all shapes and sizes. I often think that they fall into different categories in terms of what they do and offer. An example is a company that offers something unique or niche. Another is something quite common or universal, which is seeing increased demand now and potentially in the years to come.
Two stocks that I would happily buy the next time I can, that fall into these categories, are Games workshop (LSE: VAG) and Central Asian metals (LSE: CAML).
Games workshop
Board games are a very specific niche and are very far from traditional video games. Games Workshop has cornered its respective market through its popular Warhammer series. In fact, it has become a multi-million dollar company thanks to amazing organic growth.
Such has been the success of the business that it ventured into many different avenues, eventually including video games and more.
With such brand power comes phenomenal pricing power. The business now has operating margins close to 40%. Additionally, it has managed to increase revenue at an average rate of 14.5% year over year. Very impressive, if you ask me. Although I do understand that the past is not a promise of the future.
The shares are trading at a price-to-earnings ratio of 24, which in my opinion is not very high for arguably one of the best growth stocks on the FTSE. However, it's worth noting that a higher valuation is a risk. If negative business news or other problems affect the company, the stock could fall. I would be aware of this risk.
Finally, a dividend yield of 4.5% could grow in line with the business. However, I understand that dividends are never guaranteed.
As the name suggests, the company specializes in copper and zinc mining, with its own mines in Kazakhstan and North Macedonia.
Demand for these types of metals is increasing as they are key components for important infrastructure initiatives, including electric vehicles (EV), the green revolution, and more. This is good news for the company and potential shareholders, and earnings and profitability could be boosted here.
The main risk for Central Asian metals is the cyclical nature of copper prices. This fluctuation could cause performance to go up and down and affect returns. I must admit that this external risk and lack of control of the business in terms of pricing power makes me a little concerned.
A lesser risk, although still noteworthy, is that of operational problems at mining locations that could affect production levels. If this were to occur, sales, profits and investor profitability could be adversely affected. However, it is worth noting that this is a risk for all mining and commodities companies.
Getting back to the good, a huge dividend yield of close to 9% makes the stock more attractive. Additionally, the stock strikes me as good value for money with a P/E growth ratio of 0.5. Any reading below one usually indicates that the stock is undervalued.
Overall, I think Central Asian metals are poised for tremendous growth. Buying some shares now to capitalize could be a smart move, hence why I have my eyes on the stock.
