1 magnificent FTSE 250 stock I’d buy right now!

I have some spare cash to invest this month and I have been scouring it FTSE 250 for stocks to add to your portfolio. There are many opportunities to choose, with the index 20% lower than 18 months ago.

But The Evolution Group (LSE: FAN) has caught my eye, has everything I’m looking for in a stock.

What does the company do?

Founded in 2002, Volution manufactures and supplies ventilation products to the residential and commercial construction markets in the UK, Europe and Australasia. That includes everything from simple extractor fans to more complex home ventilation systems. The company’s mission statement reads: “Our goal is to provide healthy, sustainable indoor air.”

The company has successfully expanded into Europe and Australasia through several bolt-on acquisitions. The group now has 19 major brands across three geographic regions. The UK accounts for 38% of overall sales, Europe is slightly lower at 36%, with Australasia accounting for the most.

Much of this market remains fragmented, making it ripe for further consolidation. And Volution’s strong balance sheet should allow it to strategically gain market share.

Strong results

Yesterday, the company reported strong results for the six months to 31 January. Revenue rose 8.5% year-on-year to £162.3m, while adjusted operating profit rose 7.1% to £34.2m. Pre-tax profits rose by almost 6% to £22.6m. There was organic growth in all three geographic areas.

Chief executive Ronnie George, who has been at the helm since 2012, noted that homeowners and landlords have been dealing with mold and condensation issues. Rising energy bills cause people to turn down the heat, causing air quality problems. This helped its UK residential arm grow revenue by 16% during H1.

At 21.1%, the company’s adjusted operating margin remained above the 20% target set by management. And the interim dividend increased by 8.7% to 2.50p per share. The yield is low at 1.86%, but the payout is compounded at a five-year growth rate of 12%.

Going forward, management notes that inflation and supply chain challenges are easing. And with homeowners, landlords and tenants increasingly aware of the dangers of poorly ventilated properties, Volution’s future looks bright to me.

The stock is currently trading at 17 times consensus forecast earnings. It should be noted that this is higher than the average index, which can give a level of assessment risk. But at 394p, shares remain 30% off their September 2021 price of 560p.

Environmental trends

A new report from Imperial College London found that 28.6m UK homes are among the most energy efficient in Europe. They lose heat up to three times faster than on the continent, which makes people cold and ultimately poor.

This situation needs to be properly addressed by the government, especially since homes account for 30% of the UK’s total greenhouse gas emissions. Again, all of this should benefit from Volution, with a wide range of energy efficient home heating systems on the market.

I bought shares

Volution is in line with strong environmental, health and regulatory trends. It’s growing well, both organically and through acquisitions, and there’s a rising dividend backed by strong financials.

As a result, I am ready to put some shares away in my ISA for the next few years.