A FTSE 100 growth share I think will beat the Ocado share price

Ocado Group plc (LON: OCDO) shares look priced for growth, but here’s a FTSE 100 (INDEXFTSE: UKX) stock that I think will beat it.

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If TV game show Pointless ever asked contestants to name FTSE 100 companies, I suspect CRH (LSE: CRH) would be one of the best obscure answers they could give. It’s hardly a household name and is pretty much never in the news. And what does it even do?

Well, CRH is in the building materials business, supplying an international customer base in the construction industry.

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Growth

I’ll tell you what else CRH has been doing — it’s been rewarding shareholders with a 90% share price rise over the past five years. And dividend yields of around 2%-3% have added to a cracking overall return.

Over that period, CRH has been growing its earnings steadily — EPS more than doubled between 2014 and 2018. And first-half results released Thursday indicate another great year. EBITDA soared 36% to hit a company record of €1,540m, and the firm’s EBITDA margin was boosted from 9.5% to 11.7%. EPS from continuing operations jumped 51%.

Chief executive Albert Manifold spoke of “significant profit growth in the first half of 2019, with a good performance in our heritage business and strong contributions from recent acquisitions,” adding that “we anticipate further progress in the second half of the year.”

Cheap

There’s more forecast double-digit earnings growth to come, but CRH shares are not on an obvious growth valuation, with a forward P/E of only 13.5. The company seems to think its shares are cheap too, announcing a continuation of its share buyback programme with a further €350m by year-end on top of the €550m already returned.

Economic conditions are getting tough, but I think CRH has the long-term resilience to make it a tempting buy.

Setback?

Ocado (LSE: OCDO) looks to be valued as a hot FTSE 100 growth stock, despite analysts not expecting to see profits this year or next. The shares have quadrupled over the past two years.

Investors feared the worst Thursday morning as news of a fire at a warehouse in Erith brought back memories of February’s conflagration at Ocado’s Andover distribution centre, and the share price dipped 4% in early trading. But the latest event seems to have been relatively minor and has caused only minimal disruption.

I think Ocado’s tie-up with Marks & Spencer could turn out to be a very smart move, also helping M&S to refocus on what it does best.

Market share

The latest market share data from Kantar Worldpanel also shows Ocado leading the way as the biggest 12-month gainer with a 12.6% rise. Overall sales were flat, the big four (Tesco, Asda, Sainsbury and Morrisons) all saw small falls, and Lidl and Aldi continued their seemingly unstoppable rise (with gains of 12.1% and 9.5% respectively).

But to put it into perspective, Ocado still only controls 1.4% of the market, so I think it would be wrong to read too much into it right now. Growth is easier to achieve when you’re a tiny new player in a big business, and it’ll be some years yet before we get a feel for Ocado’s actual potential.

The big problem for me is that, with no sustainable profits on the horizon yet, I have no way to put a valuation on the shares. And with so many great alternatives filling up my watch list, I just don’t see any need to take the risk.

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