When analysing stocks, it’s important to not only look at past performance, but also consider future prospects too. With that in mind, I recently screened the FTSE 100 index for companies set to grow their sales by over 10% this year. I was surprised to find that the screen only listed nine companies. Here’s a look at two of them.
Reckitt Benckiser
According to analysts’ projections, sales at Reckitt Benckiser (LSE: RB) are forecast to grow 18.7% this year. Sales of £11,739m are forecast for FY2017, a significant rise on last year’s figure of £9,485m. While that sounds like a fantastic growth rate, a closer inspection reveals that the short-term outlook for the company may not be as upbeat as the numbers suggest.
The consumer goods giant reported Q3 numbers this past week, and while year-to-date revenue was up 20%, this was a result of both the acquisition of Mead Johnson Nutrition and FX gains. Like-for-like sales actually fell 1%. Chief executive Rakesh Kapoor described the environment as “challenging.”
Having said that, the CEO was very upbeat about the group’s medium and long-term prospects. The company has recently split itself into two key divisions, RB Health and RB Hygiene Home, and Kapoor stated that the business units will provide a platform for “growth and outperformance” going forward.
Reckitt Benckiser is a stock that I would definitely like to add to my portfolio one day. Having said that, on a punchy forward P/E ratio of 20.7, and dividend yield of just 2.2%, I’m not seeing a huge amount of value at present. As a result, I’m going to sit on the sidelines for now and wait for a more attractive entry point.
Ashtead
Also forecast to record significant sales growth this year is international equipment rental company Ashtead (LSE: AHT). City analysts expect revenue growth of 12.3% this year, with a top line figure of £3,578m currently pencilled in.
Ashtead has been a standout performer over the last five years, with annualised sales growth of an amazing 23% propelling the stock over 400% higher. Can investors expect the stock to keep surging higher at that rate?
Q1 results released in September were solid, with rental revenue growing 17% (at constant currency), operating profit increasing 20% and earnings per share rising 21%. Chief executive Geoff Drabble noted that the clean-up efforts and rebuild programmes of Hurricanes Harvey and Irma were boosting demand for Ashtead’s fleet, and that the board was looking to the medium term “with confidence.”
On a forward P/E ratio of 15.8, Ashtead’s valuation doesn’t look stretched at present, in my view. With that in mind, I can foresee further share price gains to come for long-term investors, although I’m not sure such gains will be as prolific as those seen in recent years.
