Kingfisher plc isn’t the only FTSE 100 stock with massive growth potential

Screwfix and B&Q owner Kingfisher (LSE: KGF) is betting that by unifying its operations and products across different brands, it can add £500m per year to its annual profits by the end of January 2021.

That’s a big gain for a company that reported an adjusted operating profit of £746m for 2015/16, when this five-year programme was launched. And the so-called ONE Kingfisher plan makes good sense. The group currently sells many different, but almost identical, product ranges in its stores in the UK, France, Poland and Russia.

Unifying these product ranges and simplifying the group’s organisation ought to deliver attractive savings and boost margins. However, executing this ambitious plan — which is expected to cost £800m — isn’t proving easy.

Today’s third-quarter trading update highlights some of the challenges being faced.

A fixer upper?

The group’s overall sales rose by 3% to £3,043m during the third quarter. But after stripping out currency gains and new store space, like-for-like (LFL) sales actually fell by 0.5%.

In the UK, LFL sales rose by 10.5% during the quarter. This was down to a 10.2% increase in LFL sales at Screwfix. At B&Q, the group’s other UK business, LFL sales fell by 1.9%. In France, the picture was weaker. LFL sales fell by 4.1%, with declines at both Castorama and Brico Dépôt.

Despite these headwinds, chief executive Véronique Laury remains confident that the group will meet full-year profit forecasts. These put the stock on a reasonable-sounding forecast P/E of 12.5, with a prospective dividend yield of 3.5%.

There’s also a second attraction. The group reported net cash of £650m at the end of the July and is mid-way through a three-year programme to return £600m to shareholders through share buybacks.

I believe this undemanding valuation and Kingfisher’s strong cash position could be a good starting point for an investment.

Is this high-flyer too cheap to ignore?

Shares of British Airways owner International Consolidated Airlines Group (LSE: IAG) have risen by 38% so far this year. But the stock still looks affordable, on just 6.7 times forecast earnings, and with a prospective dividend yield of 4.4%.

Why is the stock so apparently cheap? It doesn’t seem to be down to the group’s performance, which has seen a 3.5% increase in passenger numbers during the 10 months to 31 October. This has helped IAG to reduce the number of empty seats on its flights, with an average of 82.9% seats sold, versus 82% for the same period last year.

The problem must be that the market believes the airline group’s current level of profitability may be hard to sustain. There are several possible reasons for this. Fuel and other costs could rise, or the growth in passenger numbers might slow. Airlines might be forced to cut ticket prices to continue filling seats, while a recession could hammer demand for more profitable premium travel.

So far, there’s no sign that any of these threats are materialising. The group’s operating profit margin rose from 12.6% to 13.9% during the first nine months of this year. Full-year profit forecasts have continued to rise, climbing from €0.81 per share one year ago to €0.99 per share today. I believe the shares remain attractive, and continue to hold.