Up 33% in a year! But I think this top FTSE growth stock can keep on climbing

Harvey Jones is kicking himself for failing to buy this profitable FTSE 100 growth stock. Now he can’t see any point in waiting much longer.

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I’ve often considered buying this top FTSE 100 growth stock only to resist because I couldn’t believe it could sustain its track record. As it continues to thrash the market, it’s time for a rethink.

The company in question is fashion and lifestyle chain Next (LSE: NXT). While rival high street retailers continue to fall by the wayside, it just powers on. It has shown there’s still life in bricks and mortar retail, while successfully exploring fresh ways of growing profits. Investors can’t get enough of it.

Time to buy this FTSE 100 share?

The Next share price is up 59.47% over five years. Over 12 months, it’s up 33.91%. And it’s done this bang in the middle of a cost-of-living crisis, which has made shoppers feel poorer. Wages have scarcely grown in real terms since the financial crisis. Yet Next powers on.

Last time I looked at the stock, on 21 March, its shares were flying after it posted a 5.9% rise in group sales in the year to January. Profit before tax rose 5% to a record £918m.

Chairman Michael Roney was upbeat saying that Next had “materially outperformed our initial expectations” in an otherwise tough year for the economy. Which is what Next does.

Full-price Q1 sales beat forecasts rising 5.7% year on year and Next held full-year guidance. However, there were clouds on the horizon, as it warned wet spring weather would hit Q2 sales, while Q3 and Q4 would be slower too.

Despite that, it still expects annual profits to grow another 4.6% to £960m in the year to January 2025. It’s a bit disappointing but the economy isn’t out of the woods yet, with interest rate cut hopes retreating.

It could go higher still

It doesn’t appear to have worried Next investors too much, the share price is up another 3.22% over the last month.

The board’s taking advantage of weak valuations elsewhere, snapping up retailers Joules and MADE, and taking large equity stakes in JoJo Maman Bébé (44%), Reiss (72%) and FatFace (97%). The Total Platform venture adds another string to its bow, providing the full range of marketing, warehousing and distribution services to third-party businesses.

I’m always wary of buying successful stocks for fear of coming late to the party. That’s what’s held me back from buying Next in the past. Today, the shares look fully valued, trading at 15.1 times forecast 2024 earnings.

I didn’t buy when they were trading at around 10 or 11 times earnings, so I feel a bit of a sucker buying them today. The forecast yield of 2.4% is below the FTSE 100 average, but there’s scope for progression.

Yet history shows that it’s risky to bet against Next. 2024 could be bumpy but, with luck, 2025 will be brighter and Next will benefit. I’ll buy it as soon as I have the cash.

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.

Harvey Jones 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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