Have £1,000 to invest? An expensive (but market-beating) FTSE 100 champion could help you to retire early

You could be missing out if you overlook this FTSE 100 (INDEXFTSE: UKX) market leader.

| 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.

If you have £1,000 going spare, there’s one FTSE 100 company that I believe deserves your money more than any other business.

Market-beating return

Over the past few decades, the FTSE 100 has turned out a steady average annual return of around 8%. Private hospital provider NMC Health (LSE: NMC) has smashed this record by a wide margin. 

Over the past five years, the shares have produced an average annual total return of just under 64%. At this rate, if you’d invested £1,000 in the company back in 2013, today your investment would be worth approximately £12,000.

The question is, can investors expect a similar rate of return over the next five years? I believe there’s a good chance that they can.

Bigger and better

Since 2013, NMC’s management has achieved an outstanding record of earnings growth. Earnings per share (EPS) have risen by approximately 160% in five years (to the end of 2017). Analysts expect this trend to continue. EPS growth of 47% is projected for 2018, followed by an increase of 30% in 2019. 

And if the company meets these forecasts, EPS will be up just under 400% in seven years. For a PLC with a market capitalisation of £7.6bn, this rate of growth is nothing short of outstanding.

Unfortunately, NMC’s potential is well known, and the market is placing a significant premium on the shares. They currently trade at a historical earnings multiple of 49.7. However, on a forward-looking basis, the shares are trading at a 2019 P/E of 26. That’s not too demanding, but plenty could go wrong over the next two years.

Still, I’m confident that this private healthcare provider is well placed to continue to snowball, not just for the next two years but for the next several decades. The group operates healthcare facilities around the globe although its assets are primarily concentrated in the United Arab Emirates, the wealthiest country in the world on a per capita basis. 

As demand for healthcare is only going to grow, NMC is unlikely to struggle long term. So if you are looking to add to your retirement portfolio, in my opinion NMC is indeed worthy of further research.

Unlocking value 

Another business that looks as if it has attractive long-term prospects is children’s services provider Cambian (LSE: CMBN). Today, this company announced that it had achieved a 7% increase in revenues for the first half of 2018, along with a 40% jump in adjusted earnings before interest, tax, depreciation and amortization reflecting revenue growth and a reduction in overheads. 

Net cash on the balance sheet increased to £75m following the payment of a special dividend at the beginning of 2018.

These results are likely to be the company’s last as an independent business. CareTech Holdings is buying the firm for 100p in cash and 0.267 of a CareTech share, for a total consideration of 190p. The deal is expected to generate approximately £6m in cost savings. Considering the strengths of the Cambian business, I believe this could be an excellent combination. 

Cambian shareholders will end up owning approximately 34% of the enlarged business allowing them to benefit from further growth in the years ahead. City analysts believe that as one, Cambian/CareTech will see earnings growth of nearly 10% in 2019.

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 considered so you should consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended NMC Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I invest in the FTSE 100 – or try to beat it?

Our writer has the option of investing in a FTSE 100 tracker fund. So why does he choose to buy…

Read more »

Young black woman walking in Central London for shopping
Investing Articles

£1,500 to invest in a Stocks and Shares ISA? Here’s how I’d do it

Our writer has been investing in his Stocks and Shares ISA. Here he details how he could put £1,500 in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

2 top FTSE 100 shares I’d buy before the market rebounds!

Christopher Ruane identifies a pair of FTSE 100 shares that have both tumbled in the past year and that he…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Here’s why the next bull market may have already begun

The UK stock market has taken the Bank of England's interest rate hike in its stride and green shoots suggest…

Read more »

Gold medal
Investing Articles

No contest! Here’s my stock of the week

An update from this company offered some relief from the economic gloom. It's this Fool's stock of the week.

Read more »

Cogs turning against each other
Investing Articles

Scottish Mortgage shares are back on the rise: is now the time to jump onboard?

Scottish Mortgage shares have risen over 25% in the past 30 days. This Fool takes a look at why and…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Why do Lloyds shares seem so cheap?

Lloyds shares have been losing ground and now look cheap on some valuations. So why has our writer removed the…

Read more »

Investing Articles

How to invest in shares to help beat inflation

Soaring prices could well outstrip our investing returns this year. I think it's more important to find shares to beat…

Read more »