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2 FTSE 100 stocks with 20%+ upside by the end of 2019

Finding stocks which offer growth at a reasonable price is never easy. Arguably, it is made more difficult at a time when the FTSE 100 is trading close to its all-time high. However, since the outlook for the UK and global economy remains bright, albeit uncertain, a number of companies could deliver above-average growth over the next couple of years. As such, their share prices could more higher by 20% or more. Here are two stocks which could do just that by the end of 2019.

Wide margin of safety

Testing and inspection specialist Intertek (LSE: ITRK) appears to offer a relatively wide margin of safety at the present time. Over the last four years, its price-to-earnings (P/E) ratio has averaged 20.7. However, today it has a forward P/E ratio of 19.5. This indicates that there is scope for an upward re-rating over the medium term.

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Coupled with this is forecast earnings growth of 8% next year. This is marginally ahead of the FTSE 100’s outlook, which could boost investor sentiment in Intertek’s shares. Assuming it meets its forecasts and its rating moves up to its historic average, the company’s share price could be as much as 15% higher than today by the end of 2018.

In terms of its growth potential in 2019, Intertek is likely to deliver a bottom line which is at least 5% higher than in 2018. In the last five years, its earnings growth has averaged around 9% per annum, so assuming 5% growth in 2019 includes a margin of safety. When added to its upward re-rating and growth forecasts in 2018, this means that its shares could rise by over 20% between now and the end of 2019.

Bright growth prospects

Global medical products and technologies group Convatec (LSE: CTEC) is expected to report pre-tax profit of £136m in its first annual update since listing in October 2016. However, it is the company’s growth forecasts which could be the main catalyst for its share price between now and the end of 2019. The company is expected to record a rise in its bottom line of 94% this year, followed by further growth of 11% next year. This means its earnings are set to be more than twice their 2016 level by 2018, with further growth on the horizon.

Despite this, Convatec trades on a price-to-earnings growth (PEG) ratio of just 0.6. This indicates that its shares could move 20% higher over the medium term, since it would leave them on a still highly attractive PEG ratio of 0.7. And with dividends expected to rise from 0.24p per share in 2016 to as much as 6p per share in 2018, the company could quickly become a must-have dividend stock. Its shareholder payouts are due to be covered 2.7 times by profit next year and although it is set to yield just 2.6%, this figure could rise rapidly over the next few years. As such, this could act as an additional catalyst on its share price.

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

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