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The post-pandemic surge of Rolls Royce (LSE:RR) has been a surprise performer. It has cooled off in recent days, but at 464.3p per share, it is still 480% more expensive than it was just two years ago.
I'm not saying that Rolls-Royce's share price won't continue to rise, but right now I'd rather look for other growth stocks to buy.
Of course, the FTSE 100 Index The company’s recovery from the COVID-19 lows has been incredible. The airline industry is taking off again, defense spending is solid, and its balance sheet is in much better shape, helped by a successful restructuring under its no-longer-new CEO.
But in my view, these factors are already built into its overall valuation. At 28.1 times, Rolls-Royce's forward price-to-earnings (P/E) ratio is more than double The average Footsie is around 11 times.
In addition, there are significant threats that could derail its performance going forward. The company's director, Tufan Erginbilgic, continues to regret his “Long-standing challenges in the supply chain“Revenues could also plummet if there is a US recession and the global economy cools.
And in recent days, Cathay Pacific has grounded several aircraft due to problems with its Rolls-Royce engines. Could Footsie's company also face huge financial liabilities?
A better buy?
With this in mind, I'm looking at a growth hero today. Like Rolls-Royce, it has also seen substantial share price growth in recent years.
However, it offers much better value for money, as well as an opportunity for investors to benefit from the artificial intelligence (AI) revolution.
Who wouldn't want to take a look at it?
Cable giant
As the digital revolution progresses, cable manufacturers… Volex Group (LSE:VLX) has huge earnings potential in the coming years. It makes high-speed data cables used in telecommunications, data centers and other applications requiring fast and reliable data transmission.
More specifically, it is also a leader in the manufacture of direct attach cables (DACs). Why is this important? These cables provide high bandwidth with minimal latency and, as a result, offer fast and efficient data transfer. This makes them essential for AI applications.
And business is booming at the moment. Thanks to strong demand from the electric vehicle and data centre sectors, organic revenue rose 9% at constant exchange rates in the three months to June, the latest financial data show.
A growth stock at a bargain price
Volex's share price, which is trading at 366p per share, has also soared in recent times – up more than 300% in the past five years.
However, in my opinion, it also offers good value for money. Its forward price-to-earnings ratio of 17.6 times doesn't seem that expensive for a growth-focused tech stock.
In fact, compared to other AI stocks like Nvidia (42.3 times), Microsoft (31.6 times) and Alphabet (21.4 times), Volex is terribly cheap.
It also looks a lot more profitable than Rolls-Royce stock, as I mentioned earlier. A potential US recession could hurt earnings in the short term, but if I had money to spend on a hot growth stock, this is the one I would buy right now.