Recently, I added a new stock to my Stocks and Shares ISA. I bought this particular share because the company is generating prolific growth right now and I see the potential for strong investment returns in the years ahead.

Interested to know which company I invested in? Read on and I’ll tell you.

My new stock

The stock I snapped up for my portfolio was Applied Nutrition (LSE: APN). It’s a leading player in the supplements market (whey protein, protein bars, hydration solutions, etc) that operates in over 80 countries worldwide.

A member of the FTSE 250 index, it has a market cap of around £560m meaning that it’s a fairly small company. Its share price is about £2.25 at present versus around £1.15 a year ago.

Why I bought

As for why I bought it, there are several reasons. One is that the company stands to benefit from the health and wellness trend.

We keep hearing that younger generations are spending less money on alcohol and more on exercise and health. I see this stock as a good way to capitalise on this trend (I wrote recently that it’s basically the opposite of alcoholic beverages stock Diageo).

Another reason I invested is that the company is growing at a phenomenal rate. Back in March, it told investors that its revenue grew 57% year on year in the six months to 31 January.

There are not many UK companies growing at that pace. It suggests that the company is benefiting from the trend I mentioned above.

We also have a business that is very profitable. Over the last three years, for example, return on capital employed (ROCE) has averaged 52%.

This tells us that the group is very effective at generating profits from its capital. It’s worth noting that companies with high ROCEs often turn out to be excellent long-term investments because they’re able to reinvest a lot of money for growth and take advantage of the power of compounding.

An additional attraction for me was the fact that founder Thomas Ryder is the CEO of the company. History shows that founder-led companies are often good investments in the long run because founders tend to take a long-term, strategic view.

One other thing worth mentioning is that the share price fell 5% on 17 April after JD Sports offloaded its stake in the company. I decided to take advantage of the share price weakness and buy as the forward-looking price-to-earnings (P/E) ratio was only around 17.

Worth a look near £2?

In terms of risks, there are a few I’ll be monitoring. In the near term, the Middle East conflict could present some challenges (higher transportation costs etc).

Looking further out, a consumer slowdown (related to white collar job losses) is a bigger threat, in my view. This could see demand for discretionary goods plummet.

Taking a three-to-five-year view, however, I like the risk/reward set-up. I believe this stock is worth a closer look at current levels.

The post I just bought this magnificent £2 UK growth stock for my Stocks and Shares ISA appeared first on The Motley Fool UK.

More reading

• 2 potential hidden gems in the UK stock market
• What are the best growth shares to try and double your money?
• 2 excellent FTSE 350 stocks I just added to my ISA
• I can’t wait to buy this excellent FTSE 250 stock for my ISA in April
• As Diageo shares sink, this ‘opposite’ stock in the FTSE 250 is soaring 

Edward Sheldon has positions in Applied Nutrition and Diageo. The Motley Fool UK has recommended Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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