Up 100%+ year over year, here is an uncharted growth stock for investors to consider

When a stock doubles in value over a short period of a year, investors are clearly bullish on the company. Usually, I see such movement when the company is growing fast and growing fast, or if something has changed (for the better) in that year.

Here is one example from FTSE 250 I noted down that I feel like it flew a little under the radar.

How did we get here

I refer to Metro Bank (LSE:MTRO). The stock price is up 143% over the past year. The gain in share price mainly comes as a result of a turnaround in the fortunes of the once struggling bank.

Back in 2019, the company was hit by an accounting scandal, which saw the stock drop in value. Although it started a reform program in 2020, progress has been slow. Last year, the share price fell sharply as it tried to restructure debt and raise capital to continue operations.

Part of this plan was to reduce staff, and last November there was news of a 20% reduction in staff. Even as we enter 2024, the news that the CFO stepped down quickly in January didn’t help.

As a result, earlier this year the share price reached its lowest level since the IPO in 2016. At that time, the investor would need to be very brave and happy to take a very risky price play to justify the purchase!

A change of fortune

The risk would pay off in a big way, given the stock’s high bounce since Q1. The reason for this meeting is the release of the 2024 annual results. The bank posted an official pre-tax profit of £30.5m, the first time since 2018 it turned profitable.

This was driven by continued cost reductions, even in a period of inflationary pressure. Benefiting from higher interest rates, the deposit base is growing. Since it can make a huge profit on retained deposits, it has been an important factor in pushing the company’s profitability.

A few months ago it confirmed the sale of a book of residential houses to NatWest for £2.4bn. This will give a big boost to the balance sheet. It will also allow the bank to redeploy this capital to more profitable sectors, hopefully driving further growth in 2025.

The positive momentum continues, as the stock appears to be rising every 52 weeks.

An important point

I think investors should consider adding this growth stock to their portfolio as I don’t feel a stock price rally is underway. The price-to-earnings (P/E) ratio is only 7.22, below the 10-point fair value benchmark I use. Furthermore, the stock is only at levels last seen in September 2023. So it’s not like this is a very valuable company right now.

I accept that the risk is global competition. Metro is a new player in the market and it will be difficult to continue taking market share away from legacy players like it. Lloyds Banking Group. However, this is not possible.