3 cheap FTSE 100 growth shares to buy

These FTSE 100 shares to buy look cheap compared to their growth potential over the next few years, argues Rupert Hargreaves.

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When I am looking for shares to buy, I tend to concentrate on the FTSE 100. Indeed, I think there are some fantastic, undervalued growth stocks in this blue-chip index which I would buy today. 

FTSE 100 growth shares 

The first company I would buy is accounting software provider Sage (LSE: SGE). Currently in the middle of a transition from one-off sales to a cloud subscription model, I think the corporation is one of the best growth stocks in the FTSE 100. 

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The firm’s transformation might take a few years to evolve, but I think Sage’s brand value should help pull consumers towards the business.

The stock is currently selling at a forward price-to-earnings (P/E) multiple of 33, which is a bit pricey for me. However, compared to its international peers, I think the stock looks cheap. It also yields 2.3%. 

The company’s growth could slow if the cloud rollout does not go to plan. That is probably the most considerable risk to the firm’s growth right now. 

Shares to buy 

Alongside Sage, I would also acquire CRH (LSE: CRH). The buildings materials group is currently reaping the benefits of the global construction boom. According to analysts, net profit could jump 150% by 2022 as demand for materials and prices rise. 

As one of the largest materials groups in Europe, CRH also benefits from economies of scale. This means its profit margins are wider than the industry average, and it can afford to return more cash to investors, as well as spend more on acquisitions. The stock currently yields 2.7%, and the business has been buying back shares in recent years. 

As CRH continues to grow and invest for the future, I think the stock has a bright outlook. It is also selling at a relatively affordable P/E of 15.7, which undervalues the group’s competitive advantages in my view. 

One risk that could bring CRH’s growth to a halt is an economic slowdown. This could cause demand for materials to drop and the company to miss growth expectations. 

Growth opportunity 

Pest control is not a glamorous business, but it is a growing one. That is why I would buy Rentokil Initial (LSE: RTO)

This company is one of the largest pest control groups in the UK, but it has plenty of room to grow. It is expanding both here and overseas, where there is a steady stream of potential acquisitions. 

Figures suggest that rodent populations are rising as the world becomes warmer. This implies the demand for Rentokil’s services will continue to grow. As the company expands organically and through acquisitions, I think the stock is one of the best growth opportunities in the FTSE 100 right now. 

Some headwinds the firm might encounter include rising interest costs, leading to higher costs for the group’s debt. And more competition in the market may lead to slower growth. 

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. 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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