Even with the stock market trading near record highs, there are still growth stock opportunities hiding in plain sight for long-term investors willing to look past the noisy headlines.
Goodwin’s (LSE:GDWN) potentially a solid example. The shares collapsed 47% in a single day in March – a dramatic sell-off triggered by a surprise trading update. But when digging a little deeper, this may have secretly created an exciting buying opportunity. Let’s take a closer look…
What does Goodwin actually do?
Goodwin’s a specialist industrial engineering group operating across two core divisions.
Its Mechanical Engineering arm manufactures highly complex valves, pumps, and castings for some of the most demanding environments on the planet. Think naval defence vessels, nuclear decommissioning facilities, and liquefied natural gas infrastructure.
On the other hand, its Refractory Engineering segment produces precision materials used in jewellery casting and high-performance industrial applications.
In short, Goodwin’s a niche, technically-demanding business very few competitors can replicate. And that’s precisely what makes the recent sell-off so interesting.
So why did the shares crash?
The March trading update revealed that Goodwin had unexpectedly lost two significant tenders worth around £60.6m combined. This included a £45m contract with the Sellafield nuclear site and an €18m coastal radar contract for Estonia.
For a business of Goodwin’s size, that’s a meaningful setback. Add in some delayed valve dispatches on Middle East LNG contracts due to geopolitical uncertainty, and the market’s reaction becomes understandable.
But here’s what the panic sellers may have missed.
Despite these challenges, management nonetheless reiterated its full-year guidance with the group’s fixed order book standing at £288m. That’s because the company continues to sit on a significant pipeline of active defence and nuclear decommissioning projects that haven’t been formally contracted yet.
This ‘shadow’ order book is a powerful hidden tailwind. Defence spending and nuclear decommissioning are surging across Europe, representing a multi-decade structural opportunity that isn’t going away.
Does that make Goodwin a guaranteed winner? Of course not. We’ve already seen how surprise tender losses and geopolitical disruption can have an impact on Goodwin’s share price.
And with its Refractory Engineering segment tied strongly to the global jewellery market, higher precious metal costs as well as a general softness in luxury goods are proving to be a drag on performance.
So what’s the verdict?
The bottom line
For long-term investors, a massive share price collapse in a fundamentally sound business with a robust order book and a hidden project pipeline is exactly the kind of dislocation that can create rare buying opportunities.
Looking at Goodwin, I can’t help but feel the market’s overreacted here. That’s why I’m already considering adding this business to my portfolio. And it’s not the only interesting growth stock on my radar right now.
