Up over 100% in one year, here’s a little-known growth stock for investors to consider

When a stock doubles in value in the relatively short space of a year, investors are clearly interested in the company. Typically, I see such moves when a company is rapidly evolving and growing, or if something has fundamentally changed (for the better) over the course of this year.

Here is an example from the FTSE250 I noted that I feel like he’s flown slightly under the radar.

How we got here

I am referring to Metro Bank (LSE: MTRO). The stock price has soared 143% over the past year. The share price gains are mainly due to a reversal of fortune for the once-struggling bank.

In 2019, the company was hit by an accounting scandal, which saw the share value plummet. Although a transformation plan was launched in 2020, progress has been slow. Last year, the stock price fell further as the company attempted to restructure its debt and raise capital to continue operations.

Part of the process involved downsizing, with the announcement last November of a 20% reduction in staff numbers. Even as we move into 2024, the announcement of the CFO’s resignation with immediate effect in January has not helped.

As a result, earlier this year the stock price hit its lowest level since the IPO in 2016. At this point, an investor should have been very brave and just jumped into a game of high-risk value to justify its purchase!

A change of fortune

The risk would have been largely rewarded, given the share’s explosion since the first quarter. The catalyst that sparked the recovery was the publication of 2024 annual results. The bank recorded a statutory pre-tax profit of £30.5m, the first time since 2018 it has become profitable again.

This is due to continued cost reduction, even during a period of inflationary pressures. It benefited from higher interest rates and a growing deposit base. As it can generate a higher net interest margin on deposits held, this has been a key factor in pushing the company into profit.

A few months ago, he confirmed the sale of the residential mortgage portfolio to NatWest for £2.4 billion. This will give a big boost to the balance sheet. It will also allow the bank to redeploy this cash to more profitable divisions, hopefully fueling further growth for 2025.

The positive momentum continued, with the stock appearing to consistently reach new 52-week highs.

The essentials

I think investors should consider adding this growth stock to their portfolio, as I don’t think the stock price rally is over yet. The price-to-earnings (P/E) ratio is only 7.22, below the fair value benchmark of 10 that I use. Additionally, the stock is only at levels last seen in September 2023. So it’s not like it’s an overvalued company right now.

I accept that the competitive landscape is a risk. Metro is a relatively new player in the market and it will struggle to continue taking market share from traditional players like Lloyds Banking Group. However, it is not impossible.