The Motley Fool

Expensive but exceptional! 2 FTSE 100 stars that could make you rich

I am convinced that Intertek Group (LSE: ITRK) has all the tools to deliver formidable profit growth in the years ahead and justifies its expensive valuation.

The FTSE 100 giant has seen its shares go gangbusters in 2017, up 55% since the bells rang in New Year’s Day. And I expect its market value to keep on swelling as revenues continue to improve.

Intertek, which provides testing, inspection and certification services, announced in early August that sales jumped 13.2% during January-June, to £1.37bn. And on an organic basis, sales rose by a solid 1.7%, with revenues at its core Products and Trade units leaping 5.8% and 4.6%, respectively, on this basis.

The top line continues to hot up (by comparison organic sales rose 0.9% in the four months to April), but this is not the only reason for excitement as margins grew by 90 basis points at stable exchange rates in the first half. And acquisitions, such as Germany’s KJ Tech Services earlier this year, provide plenty of opportunity for Intertek to build both sales and margins even further.

Profits on the march

In the meantime, Intertek is expected to generate decent earnings growth of 11% and 7% in 2017 and 2018, respectively. And the company’s ultra-progressive dividend policy provides plenty more reason to get excited.

On the back of the terrific half-year result and robust cash generation (free cash flow rose £75m during January-June), its interim dividend was bulked up to 23.5p per share, from 19.4p a year earlier, up 21.1%.

And for the full year, the City expects the testing giant to pay a 70.7p per share reward, up from 62.4p in 2016, yielding a handy 1.3%. And for 2018, the payment is predicted to surge to 76.1p, meaning the yield jumps to 1.4%.

The global quality assurance market (which Intertek values at some $250m) offers plenty of upside as commerce grows, trade processes become increasingly complex and regulations increase, and through the vast investment the firm is making in both organic operations and M&A. I believe it’s in terrific shape to deliver blockbuster earnings and dividend expansion in the years ahead.

As such, I believe it is fully worthy of a forward P/E ratio of 28.5 times.

Funds favourite

Like Intertek, St James’s Place (LSE: STJ) also carries a valuation that soars above the widely-accepted value benchmark of 15 times — the financial colossus currently sports a prospective P/E multiple of 29.6 times.

Business continues to bubble up at the wealth management giant, and its latest trading statement in October showed gross inflows of funds under management shoot to £3.59bn from £2.8bn a year earlier.

And as the growing popularity of its broad range of funds and products feeds through to exceptional earnings forecasts, the Square Mile’s number crunchers estimating bottom-line expansion of 87% in 2017 and 24% next year.

With St James’s Place also predicted to churn out increasingly terrific dividends — predicted payouts of 41.1p and 47.4p per share for 2017 and 2018 yield 3.5% and 4% — I reckon the Footsie beauty is also worth a close look today.

Don’t regret ignoring this growth tip

But St James's Place and Intertek are just a couple of the London-listed heroes you can buy today and live off in the years to come.

Indeed, the Motley Fool's army of analysts has toiled to write this special Fool report which picks out a brilliant FTSE 250 stock that has already delivered stunning shareholder returns, and whose sales are expected to balloon in the next few years.

Click here to enjoy this exclusive wealth report. Our A Top Growth Share investment guide is 100% free and comes with no obligation, so why not check it out?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek. 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.