Are these the FTSE 100’s hottest growth stocks?

Bilaal Mohamed reveals two shares from the FTSE 100 (INDEXFTSE:UKX) with plenty of upside potential.

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Speciality pharmaceuticals company Shire (LSE: SHP) updated the market yesterday with a slightly disappointing set of results for the third quarter of its financial year thanks to higher than expected costs from the acquisition of US-based Baxalta in June. The FTSE 100 drugmaker reported an operating loss of $406m for the three months to the end of September, compared to a profit of $456m for the same period a year earlier. Shire said this was primarily due to the impact of acquisition accounting combined with higher integration and acquisition costs.

The Dublin-based group did however reveal a 110% increase in product sales year-on-year to $3.32bn, but this figure falls to $1.77bn without the inclusion of Baxalta products. The group’ s new dry-eye treatment XIIDRA, which was launched in August, contributed $14m to Shire’s Ophthalmology franchise with 64,732 scripts written through to 21 October having gained a 16% market share.

Attention growth investors

Shire has long been a favourite of the City with an excellent track record of growth over the years helped by an ever-larger product portfolio and a strong balance sheet. The Baxalta acquisition earlier this year significantly increased the size of the business thereby giving it more marketing power. Although not as widely known as its blue chip counterparts GlaxoSmithKline and AstraZeneca, Shire has grown into a £41bn business that has progressed well from the specialist Attention Deficit Disorder (ADD) treatments for which it’s best known.

Our friends in the City are expecting revenues to come in just shy of £9bn for the full year to the end of December, with pre-tax profits rising passed the £3bn mark. Furthermore, analysts are predicting a massive 84% rise in underlying earnings to £3.1bn, with a further 19% improvement pencilled-in for 2017. If these growth projections are realised, Shire will be trading on a very undemanding price-to-earnings ratio of 12 by the end of next year. At current levels the shares look far too cheap given the earnings outlook.

Brexit boost

International equipment rental firm Ashtead Group (LSE: AHT) says it expects full year results to be ahead of expectations after having benefitted from the weaker pound in the first quarter of its financial year thanks to the Brexit vote. The group revealed that total rental revenues were up by 12% to £661m with underlying operating profits rising by 4% to £206.6m, compared to £180.2m for the same period a year earlier.

Shares in the London-based group dipped to below 800p at the start of the year, which many will now see as a missed opportunity, with the shares having rallied to all-time highs of 1,347p last month. But I think there’s still plenty more to come from Ashtead, with double-digit growth anticipated for the next couple of years and a very appealing earnings multiple that falls to 11 by the end of fiscal 2018.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

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