The FTSE 100’s Hottest Growth Stocks: Sports Direct International Plc

Today I am outlining why Sports Direct International (LSE: SPD) could be considered a terrific stock for growth hunters.

Top of the sports table

Against a backcloth of rampaging retail sales growth, Sports Direct continues to clock up terrific revenue growth, a situation helped in no small part by the ‘get fit’ phenomenon that continues to sweep the country.

The business announced in last week’s interims that total sales during May-July rocketed 12.2% to £711.2m, a result that drove gross profit sportsdirect11.8% higher to £301.2m. Even the implication of England’s inevitable disappointment at the FIFA World Cupduring the summer, and subsequent impact on jersey sales, failed to take the shine off the firm’s bubbly performance during the quarter.

Following the failure of JJB Sports back in 2012, Sports Direct is now unrivalled in the ‘affordable’ sportswear market and is stretching its legs to pull away further from the competition. The business has invested heavily to develop its multi-channel approach, while an increasing embrace of more niche pursuits — from climbing and camping through to fishing — is also paying dividends.

The retailer operates more than 400 outlets up and down the UK, but is increasingly looking to the continent to turbocharge sales growth — Sports Direct currently operates in 19 European countries including France, Belgium and Portugal.

And critically last year’s purchase of Austria’s Sports Ebyl chain gave it the warehousing space to significantly boost online sales across Europe. Indeed, Bank of America-Merrill Lynch expects overseas markets to account for 40% of group sales within the next ten years.

Earnings projections setting a blistering pace

Despite the lingering effect of macroeconomic woes on consumer spending, Sports Direct has an unbroken record of consistent earnings growth recorded over many years, and has clocked up expansion at a compound annual growth rate of 27.9% during the past five years alone.

And City brokers expect the sportwear giant to maintain this positive momentum during the medium term at least, and earnings are expected to rattle 25% and 14% higher for the years concluding April 2015 and 2016 respectively, to 38.5p and 44.1p.

These figures leave the business dealing on a P/E multiple of 18.5 times prospective earnings for this year — a little way above the standard of 15 or below which indicates decent value for money — although this slips to 16.1 for 2015.

Still, I believe that savvy stock hunters should take note of the firm’s ultra-low price to earnings to growth (PEG) numbers for this year and next, which clock in at just 0.8 and 1.1 for these years. Any number around or below 1 is widely-considered fantastic bang for one’s buck.

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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.