Considerable risk

These are exciting times for investors in BT (LSE: BT.A). That’s because the company is transforming its product offering and quickly becoming a dominant quad play operator. For example, it has acquired the UK’s largest mobile network, introduced BT Mobile, spent billions on its pay-tv offering and has invested heavily in superfast broadband. Furthermore, BT has offered huge discounts to new customers as it seeks to deliver rapidly rising customer numbers so it can cross-sell new services to them.

Clearly, all of the changes which BT is making could yield a superb return for its investors. However, they also come with considerable risk. Integrating a major mobile network into any business is likely to be a challenge, but doing so while undergoing rapid change in other areas means that BT may encounter unforeseen challenges. This could cause investor sentiment to come under pressure and mean that BT’s share price fails to beat the wider index. And with BT forecast to record a decline in its bottom line of 7% this year, its shares may already underperform the FTSE 100.

Very bright growth prospects

While BT may not beat the FTSE 100 this year, Breedon Aggregates (LSE: BREE) has an excellent chance of doing so. That’s largely because the aggregates company has very bright growth prospects and is forecast to increase its bottom line by 10% in the current year and by a further 26% next year. This rate of growth follows four consecutive years of earnings growth, which shows that Breedon may be a relatively reliable growth play.

Despite this, Breedon trades on a price-to-earnings growth (PEG) ratio of just 0.8, which indicates that if offers considerable capital gain potential. And with dividends due to commence next year, investor sentiment could pick up and allow Breedon’s share price to beat that of the wider index as the company’s confidence in its long term outlook improves.

Considerable upside potential

Meanwhile, Smart Metering Services (LSE: SMS) also has an excellent track record of growth. In the last four years it has been able to record an annualised growth rate of 44% and while growth of 13% next year may be something of a comedown after such a strong period of growth, it could still cause investor sentiment towards the metering services specialist to improve. That’s despite its shares having already risen by an impressive 27% since the turn of the year.

With Smart Metering Systems trading on a PEG ratio of 1.6, it seems to offer considerable upside potential. Certainly, there is a risk of downgrades to forecasts, but with the company expected to increase dividends per share by 23% next year, it appears to be confident in its long term outlook. Therefore, buying now could be a sound move ahead of potential FTSE 100-beating performance.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.