When talking about growth ideas, a lot of focus gets put on the tech and renewable energy sectors. There’s nothing wrong with this, as both areas clearly have large potential for the future. Yet sometimes it means that other FTSE-listed gems can go under the radar, representing a great buying opportunity for shrewd investors.
On a (sausage) roll
The first idea is as far away from tech and energy as possible, namely a high-street bakery chain. Greggs (LSE:GRG) doesn’t fit the mould of a conventional growth stock, but it shouldn’t be discounted.
The share price has risen by 26% over the past year, and 133% over the past five years. This is backed up by growth across many financial metrics and store openings.
For example, revenue last year jumped 23% to £1.51bn. What impresses me about this number is that it’s easy to achieve this kind of percentage growth when a company is small. Yet to deliver it when revenue is already in the billions is a great feat.
With over 2,300 stores open and a strategy to open more this coming year, I feel momentum is with the company. Initiatives such as keeping stores open later to capture dinner business should also help it to be a continued hit.
As a risk, I think the business has lots of avenues for growth but needs to pick them selectively to not get distracted. The fashion line collaboration with Primark is one example where I think it was a rather pointless exercise.
Growing with the nations pets
The second company in focus is Pets at Home Group (LSE:PETS). The share price is up 24% over the past year, with the firm listed on the FTSE 250.
Last year, pet ownership in the UK rose to 62% of households. This is the highest level in a decade. Some of this was likely fuelled by the pandemic, yet it shows that as a nation, we have a lot of pets o which to spend money.
Pets at Home has benefited from this surge. In the latest trading update from January, it had record Q3 consumer revenue. Importantly, it was also up 30% from the equivalent pre-pandemic quarter.
Unlike some other pandemic demand fads that have now faded, I don’t see this being the case for the business. Pets will need to be cared for in coming years, providing strong repeat revenue for the company.
Of course, with many products manufactured or shipped from abroad, higher freight costs and inflation in other areas isn’t good news. Yet with the full-year profit before tax guidance raised in January, it appears that the impact on costs is being negated by higher revenue.
I think investors should consider both stocks for their portfolios as options for growth in the coming years.
