The FTSE 100’s Hottest Growth Stocks: ITV plc

Today I am outlining why ITV (LSE: ITV) could be considered a terrific stock for growth hunters.

Revenues on the charge

Despite the glut of channels currently on offer to British television audiences, not to mention the huge impact of the internet in dragging viewers away from the box, broadcasting giant ITV has managed to keep bums on seats and consequently keep the revenues streaming

The business saw total external turnover rise 7% during January-June, to £1.2bn, it announced in July. And crucially ITV is successfully cottoning onto changing consumer preferences towards internet and ‘on demand’ viewing, and saw revenues from online, interactive and pay channels surge 20% during the period to £67m.

Meanwhile the company’s ITV Studios division — Britain’s largest production company and producer of hits shows including Downton Abbey and Coronation Street — saw revenues edge 2% higher in the first half to £402m. And the firm’s aim to crack new geographic markets through acquisitions was boosted by its purchase of Leftfield Entertainment in May, enhancing its exposure to the high-growth reality TV sub-sector in the US.

Earnings growth set to rumble on

ITV’s Transformation plan launched in mid-2010 — which includes creating more programme for international markets, and creating a worldwide pay and distribution service — is clearly working wonders, and earnings have rocketed higher at a compound annual growth rate of 20.5% since then.

And the City’s number crunchers expect the programme to continue delivering the goods, and ITV is anticipated to generate earnings growth of 16% in 2014, to 13p per share. A further 11% rise is predicted for next year to 14.5p.

These figures leave the company changing hands on a P/E ratio of 16.6 times prospective earnings for this year, and which falls to 15 for 2015, smack bang on the yardstick which is generally regarded as decent value for money.

While it is true that these numbers are hardly eye-popping in pure value terms, I believe that investors should pay closer attention to ITV’s price to earnings to growth (PEG) figures for these years. Indeed, a readout of 1 for 2014 is in line with the standard which represents terrific bang for one’s buck, and which remains at cheap levels around 1.4 for 2015.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.