Up 77% this year! How did I miss the parabolic growth of this excellent FTSE 250 stock?

Now, it's sneaky FTSE 250 the stock comes out suddenly and catches me by surprise.

That's what happened this week with the construction and renewal team Morgan Sindall (LSE: MGNS). Shares in the £1.82bn company have managed to climb 77% this year before I knew it!

But the sudden 22% jump last week gave it away and I had to see what all the fuss was about.

Jack of all trades

Morgan Sindall operates in six major divisions across the UK: construction, infrastructure, equity, building services, co-operative housing, and urban regeneration services.

It does everything from large civil engineering projects to commercial and retail maintenance and small urban changes. This type of business is likely to be in high demand, which is an important factor I look for when considering an investment opportunity.

Why did it suddenly grow?

Last week's price increase was huge but the current trend started two years ago. After falling below £14 in late October 2022, the price began a recovery that hasn't wavered since, rising 175%.

It's hard to say what started growing at that time but the reasons for last week are clear. On Tuesday 22 October, it announced that its full year profit will now be “very forward” of previous expectations. This was caused by “unusual volumes” in its fit-out classification.

This adds to the already strong H1 results posted in August. Group revenue rose 14% to £2.2bn and operating profit before tax rose 17% to £70.1m.

That fit-out phase performed particularly well, with revenue up 26% to £630m and operating profit up 36% to £41.3m.

Construction grew by 10% in revenue while infrastructure revenue increased by 24%. Despite challenges such as inflation, both segments achieved strong operating margins within target ranges.

However, the Building Services division has struggled, reporting an operating loss of £11m, due to inflation and restructuring efforts. This is a major risk for the company as expensive borrowing reduces the overall demand for commercial and residential construction.

The industry is also highly competitive, with several large players vying for large contracts. Greater competition can lead to less profit as companies do not want to win projects, which can threaten Morgan Sindall's profits.

Measurement

Despite recent growth, the forward price-to-earnings (P/E) ratio is only 14.3, which I expected to be higher. The dividend yield currently sits at 3%, slightly below the FTSE 250 average. Still, it adds some value to the stock.

Although the price may still rise slightly, the rapid growth is likely to slow down from here. Its long-term prospects still look good but I think I've missed the biggest gain.

So how can I avoid missing an opportunity like this in the future? Strong results are one thing but they do not guarantee future growth. It is also important to look for stocks in growing industries that have high demand. Second, the company's order book and project pipeline provide an idea of ​​future revenue.

If it keeps increasing its profits, that's another good sign. By examining industry demand, financial indicators and macro trends, investors can improve their chances of anticipating a stock rally before it happens.