Can I double my money with this FTSE 100 growth stock?

The share price of this growth stock has doubled since 2020 and, with several AI-driven applications, has real potential to double again.

| More on:
A pastel colored growing graph with rising rocket.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 is the crown jewel of the London Stock Exchange – home to 100 of the UK’s largest public companies and is not usually known for its growth stocks.

But despite the Footsie’s reputation for mature, slow-growing companies, the index boasts plenty of firms that double or triple in value in short spaces of time. 

One stock – analytics company Relx (LSE: REL) – doubled in the last three years, not even taking into account its decent dividend payment. 

And a recent shift into artificial intelligence might mean it won’t take too long to double again.

What does Relx do?

Relx has its finger in a lot pies, but a sizeable amount of revenues come from data analytics. 

Its £2bn Legal segment helps lawyers make sense of tomes of legal data quickly and easily. It’s not hard to see why customers value this service.

Likewise, it’s easy to see how much an effective AI application could help here. 

Its latest offering, Lexis+ AI, has already been released. Lexis+ AI is an “AI Legal Assistant” that promises “hallucination-free” synthesis of legal documents and other data. 

Rolling this out along with Scopus AI (for academic documents) and Clinical Key AI (for medical documents) could trigger the share price going on another tear.

Overseeing this process is CEO Erik Engstrom. He’s been in charge for 15 years already and created £50bn in market value for the company. 

A success

He’s helped Relx outperform the rest of the FTSE 100 for 12 out of the last 13 years too.

A recent Financial Times piece called him an “unflashy Swede” and noted how he eschews private jets, catches the tube to work, and likes to eat at Itsu. 

These are small details but I’m happy to hear the top brass sound grounded and I don’t think it’s a coincidence he’s been such a success already. 

In fact, one of the bigger risks might be if he decides to call it a day sometime soon. 

Now, as much as I like what I’ve covered so far, we have the thorny issue of the valuation to deal with. In short, the shares aren’t cheap. 

Relx trades at seven times sales (Footsie average: 2), 26 times free cash flow (Footsie average: 15), and 36 times earnings (Footsie average: 11).

Using a PEG (price-to-earnings growth) ratio to assess whether earnings growth justifies the priciness – where below one is considered reasonable – the stock comes in at a dizzying 3.51.

The shares look a little less expensive when compared to the US where it has a dual listing – S&P 500 stocks trade at 28 times earnings on average. 

Another reason is that the share price – up 43% over the last year – has been dragged upwards by the AI hype-train.

My move

All things considered, the Relx share price has potential to double again but also to deflate. I’ll be looking to pick up the shares if it gets any cheaper.

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.

John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended RELX. 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

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Investing freedom — but inside a pension

Strapped consumers might be cutting back on investing, but they’re still keeping up their pension contributions. The only problem? A…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Forget gold! I’d rather buy these 3 FTSE high-yielders in a Stocks and Shares ISA

Gold looks like a risky investment to me as the price hits an all-time high. I'm ignoring the fuss to…

Read more »

Young female business analyst looking at a graph chart while working from home
Growth Shares

This 55p UK stock could rise more than 300%, according to a City broker

This UK stock has fallen from above 800p to below 60p. But analysts at Citi believe it’s capable of a…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

I think this FTSE 250 trust has all the right ingredients to lock in long-term profits

Today I'm examining the prospects of a private equity investment trust on the FTSE 250 that caught my attention recently…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 under-the-radar UK shares investors should consider snapping up

Two UK shares have caught the eye of our writer. She explains why investors should be taking a closer look…

Read more »

Investing Articles

Are these 2 ultra-high-yielding income stocks a good buy for me?

These two income stocks often split the debate amongst investors. So what does our writer think of them as potential…

Read more »

Senior woman potting plant in garden at home
Investing Articles

5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the…

Read more »

A young Asian woman holding up her index finger
Investing Articles

I’d aim for a second income of £1,000 a month with this super-reliable dividend stock

I think a great way to build a second income stream is by investing in dividend stocks via a Stocks…

Read more »