FTSE 250 stock Goodwin (LSE: GDWN) has been on my shopping list for years. I thought it was a terrific growth stock, but there was a problem. I wasn’t the only one who thought that. Its shares were shockingly expensive.
The UK-based family firm was founded way back in 1883. Today, it engineers precision components for the defence, energy and industrial sectors, with a focus on higher-margin defence and nuclear contracts.
This is a global business, with 18 manufacturing sites across Europe, Asia, Africa and the Americas. Almost three quarters of sales are made overseas. I was all ready to buy it last summer, but the shares suddenly became even pricier after 2025 pre-tax profits jumped 47% to £35.5m, on record-breaking revenues of £220m.
Why’s Goodwin in demand?
The stock continued to climb as Goodwin went onto secure new lucrative orders in the defence boom, driving the price-to-earnings (P/E) to a dizzying 65. As a rule, I prefer to buy shares when they’ve fallen out of favour, and have a low P/E and higher yield as a result. I’m scared of jumping on whizzy growth stocks just as they run out of steam.
Like any strategy, it’s not perfect. I’ve missed out on a few red-hot momentum stocks as a result. But it worked here. On 23 March, Goodwin revealed it had lost two contract tenders, and was reducing its dividend in response to Iran war uncertainty. The stock crashed by half, from 24,200p to 11,950p.
I waited for the dust to settle and bought the stock on 22 May and 28 May, at an average price of 14,420p. Today, the Goodwin share price stands at 14,980p. I hope to hold it for decades, which will hopefully give it plenty of time to recover. So should investors consider it today?
So what are the pros and cons?
I can see three big attractions here:
- Goodwin has a history of robust financial performance performance and profitability. It has regularly posted double-digit annual revenue growth.
- It’s a diversified operation: the business operates across the defence, civil aviation, oil, gas and nuclear project sectors.
- Its management structure: executives are heavily invested in the company, giving them a real incentive to drive investor rewards.
But there are also three risks:
- Potential volatility: Goodwin shares spiked last year, and have now plunged. There could be more ups and downs to come.
- Contract timing threats: revenue flow will always be variable due to contract wins, completions and, as we’ve just seen, postponements.
- Precious metals exposure: its refractory engineering segment is exposed to shifts in the jewellery market, including gold and silver prices.
I prefer to buy cyclical stocks when they’re down, as Goodwin is. But it isn’t exactly a bargain today. That P/E is still a hefty 44. So I wouldn’t say it’s a screaming buy, except for investors like me who’ve been patiently waiting for a buying opportunity.
I think it’s worth considering for investors who are comfortable with the risks and willing to take a long-term view.
Should you invest £5,000 in Goodwin Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Goodwin Plc made the list?
Harvey Jones owns shares in Goodwin.
