2 FTSE 100 shares I’d buy for growth

Christopher Ruane identifies two FTSE shares with double-digit revenue and earnings increases that he believes could continue their growth streak.

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The ‘growth paradox’ suggests that as companies get larger and more complex, it can become harder for them to keep growing. So, in the index of large companies known as FTSE 100 shares, it makes sense that many companies will struggle to maintain growth.

But some will manage to grow strongly. Here are two FTSE 100 shares I would consider now as growth picks for my portfolio.

Spirax-Sarco

The engineering company Spirax-Sarco (LSE: SPX) is perhaps best known for its decades long history of annual dividend increases. That stretches back over half a century.

But this specialist business isn’t just an income pick. I think it has strong growth potential. Over the past five years, its adjusted revenues have jumped from £667m to £1.193bn. That’s a compound annual growth rate (CAGR) of 12%, even though last year the pandemic slightly hurt performance.

The crucial question, as always, is whether it was profitable growth. In 2015, basic earnings per share came in at 129.9p. Last year they were 235.5p. At 13%, that CAGR is actually a little above the revenue growth.

Where next for the Spirax-Sarco share price?

Double-digit revenue and earnings per share growth is a tough feat for any company to achieve year after year, let alone FTSE 100 shares like Spirax-Sarco. But it does help to explain why the company has been able to keep increasing its dividend each year for so long.

Quality rarely comes cheap. The Spirax-Sarco share price already reflects a lot of the bullish sentiment around the company. With a price-to-earnings ratio of 54, the valuation looks high to me. But sometimes quality is worth paying for. Thanks to its diverse customer base, specialised expertise, and bespoke offerings, I see continued growth prospects for these shares. But there is also a risk that companies keen to bolster their liquidity defer non-essential maintenance. That could hurt Spirax-Sarco’s revenues.

FTSE 100 shares with pace and stamina

Sports retailer JD Sports (LSE: JD) is another FTSE 100 growth pick I would consider for my portfolio.

Last year’s turnover came in at £6.2bn, up from £1.8bn five years previously. That’s a CAGR of approximately 28%. Even though basic earnings per share fell last year, the CAGR over the five years was still 18%.

Although revenue growth outstripped earnings growth, both figures reflected a strong performance in my view. The income benefit for shareholders was less impressive. Dividends actually fell slightly from 1.48p in 2016 to 1.44p in 2021. That is a meagre 0.2% yield.

I don’t like JD for its income properties, though. It’s the growth that attracts me. The shares have more than quadrupled over the past five years, as the JD Sports share price put on 320%.

JD Sports outlook

Growth brings its own challenges and some of those pose risks for JD. For example, with its stores now stretching from Australia to the US, company logistics are complex. Sudden jumps in container freight rates, which have soared this year, could cut profits.

Longer term, I think both Spirax-Sarco and JD Sports are attractive growth picks among FTSE 100 shares for my portfolio.

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.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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