The FTSE 250 can be a great place to hunt for growth investments. In this index, there are a lot of companies that are both growing quickly and not yet really discovered by the mainstream investment community.

Here, I’m going to highlight a FTSE 250 share I’m excited about (I’ve recently been buying it for my ISA). In my view, this stock has the potential to outperform a lot of popular stocks (eg Rolls-Royce, Lloyds) in the next two years.

Small but mighty

The company is Applied Nutrition (LSE: APN), a leading maker of premium nutritional supplements (eg protein powders, hydration drinks).

At its current share price of £2.33, it has a market-cap of £583m. Give it a few years though, and I think we could potentially be looking at a £1bn valuation.

Why am I bullish?

As for why I’m bullish here, there are a number of reasons. One is that younger consumers are generally very health/fitness focused. These generations are spending less on alcohol and more on nutritional supplements, a trend that should support company growth in the years ahead.

Another is brand power. There are a lot of companies making nutritional supplements today (which is a risk) however, but where I think Applied Nutrition has an edge is that consumers recognise and trust the brand (there are, after all, some poor brands/products out there).

One thing helping the brand is the fact that the company’s products are sold at trusted retailers such as Tesco and Holland & Barrett. I’ll point out that I was in Holland & Barrett last week and Applied Nutrition’s products were occupying a lot of shelf space.

I’m also impressed with the range of products on offer. This isn’t just a whey protein company, today it offers everything from vitamins to sleep support supplements.

Strong financials

As for the company’s financials, they look fantastic. Over the last three financial years, revenue has climbed from £35m to £107m. This financial year (ending 31 July), the company is targeting £140m in revenue. That would represent growth of around 30%.

In terms of profitability, operating margins are in the high 20s. Meanwhile, return on capital employed is near 50%.

Turning to the balance sheet, this is robust. At the end of January, the company had £26m in cash and cash equivalents and no long-term debt.

How’s the valuation?

Zooming in on the valuation, it seems very reasonable to me. Looking at earnings forecasts for next financial year (starting August), the forward-looking price-to-earnings (P/E) ratio’s only 18.6.

At that multiple, I see the potential for share price gains if earnings continue to climb. We could even see some earnings multiple expansion.

I’m a buyer

In terms of risks, a slowdown in consumer spending is one. The fact that younger generations are finding it harder to get a job is an issue to think about. Competition from rivals is another. Other big brands here include Myprotein, PhD Nutrition, and Optimum Nutrition.

However, I like the risk/reward proposition. In my view, this stock’s worth considering as a growth play. As noted above, I’ve been buying it recently. And so has my colleague Ben McPoland.

Should you invest £5,000 in Applied Nutrition Plc right now?

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Edward Sheldon owns shares in Applied Nutrition