3 FTSE 100 stocks with ‘explosive’ growth potential: Worldpay Group plc, Hikma Pharmaceuticals plc and Paddy Power Betfair plc ord eur0.09

Think FTSE 100 stocks are boring? Check out these three exciting opportunities: Worldpay Group plc (LON: WPG), Hikma Pharmaceuticals plc (LON: HIK) and Paddy Power Betfair plc ord eur0.09 (LON: PPB).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When you think of the FTSE 100 index, there aren’t many ‘high growth’ stocks that come to mind easily. So many of the big exciting growth companies seem to be listed in the US, leaving our key index with large, slow-burning companies such as the oil majors and healthcare giants.

However, if you’re willing to look down the list of FTSE 100 constituents and examine some of the smaller companies in the index, there are some hidden gems that have the potential to grow much faster than the average FTSE 100 stock. Here are three that I think have excellent growth potential.

Payments champion

A leader in global payments, Worldpay (LSE:WPG) floated in the UK late last year but has so far seen a rather lacklustre share price performance.

The company provides payment solutions in-store, online and through mobile devices. Given the huge movement towards online and mobile shopping over the last few years, I believe this is one of the more exciting growth areas within the FTSE 100 right now. Indeed, management plans to grow revenues between 9% and 11% per year and is targeting the US as one of its key growth markets. 

Revenue last year came in at £982m, a 14% increase on 2014. Earnings per share were a lowly 4p, however, consensus estimates have earnings at 11p and 13p over the next two years, so analysts clearly believe there’s growth on the cards.

On the current share price of 263p, earnings of 11p results mean a P/E ratio of 24, which isn’t outrageous if the company can execute its growth plans. 

Not your average pharmaceutical company

FTSE 100 pharmaceutical companies and the words ‘high growth’ are generally not seen in the same sentence together. But if you look beyond the mainstream pharmaceutical giants, there’s a lesser known drugs company that’s growing at a fast pace, Hikma Pharmaceuticals (LSE: HIK).

Hikma is a family-run company based in Jordan. With a market cap of £5.5bn, it’s a lot smaller than the big boys in the pharma space but don’t let that put you off.

The company operates three broad divisions, generic, branded and injectible medicines, and sells its products in the US, Europe and the MENA region.

Management has a strong record of delivering shareholder value through acquisitions and organic growth and the numbers speak for themselves. Over the last five years, revenues have nearly doubled, and earnings per share have risen from 52 cents in 2010 to $1.35p in 2015.

Earnings for FY2016 are estimated to fall slightly due to acquisition and integration costs, but once these issues are sorted, I expect earnings at Hikma to roar into action.

On the current P/E ratio of 26, Hikma is pricey. But given that revenues have risen at a compound annual growth rate of 14.5% over the last five years, this is a company that’s growing quickly. 

Gambling powerhouse

There may have been a few sporting upsets this year, but that shouldn’t stop newly formed Paddy Power Betfair (LSE: PPB) charging ahead.

The £7.5bn market cap gambling giant reported earnings in early May and revealed that revenues were up 16% year-on-year with particularly strong performances from online gambling.

With Euro 2016 and the Brazil Olympics on the horizon, I’m expecting the momentum to continue here, but be warned that on a P/E of 31 times next year’s earnings, this stock isn’t cheap.  

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.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals and Paddy Power Betfair. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

This 9.75% yielding FTSE 100 share is a total no-brainer for second income

This FTSE 100 insurance company is an absolutely brilliant source of second income and Harvey Jones reckons it will be…

Read more »

Dividend Shares

I could make £14.2k of passive income from £99 a week with this secret sauce

Jon Smith explains why sacrificing the immediate reward of dividends today can boost his long-term passive income prospects.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Which looks the better bank buy right now: Lloyds or NatWest shares?

Lloyds shares are a very popular pick among FTSE 100 investors, but I think there are several better choices overall,…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,000 in savings? Here’s how I’d target a £14,616 annual passive income with M&G shares!

Big passive income can be generated over time with 9.5%-yielding M&G shares, especially if the dividends paid are used to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

If I’d put £1k in this FTSE 100 stock five years ago, here’s how much I’d have now!

Mark David Hartley works out what sort of profit he’d have made by investing in this FTSE 100 pick pre-pandemic.…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »