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A FTSE 100 growth stock that could explode in 2018

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I have long talked up the investment potential of International Consolidated Airlines Group (LSE: IAG).

Vast restructuring and cost-cutting has enabled the British Airways and Iberia operator to overcome the woes of many of its rivals to post strong and sustained earnings growth in recent times. And soaring passenger numbers (up 6.1% during December) make me confident that profits can keep on booming.

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IAG is of course a major player in the highly lucrative transatlantic arena, a segment in which it is hoping to continue dominating after the launch of its low-cost Level brand last year. And the FTSE 100 business has big plans for its cut-price airlines back in Europe too.

It announced earlier this month plans to pay €20m for the assets of Austrian airline Niki (which was part of the now-defunct Air Berlin group). This comprises 15 Airbus A320 aircraft and airport slots across Germany, Austria and Spain. It will be swallowed up by IAG’s Vueling brand and will significantly boost IAG’s position in Northern Europe.

On cloud nine

IAG has been chucking out brilliant earnings growth in recent years, the bottom line having swelled at a compound annual growth rate of 45.8% in the four years from and including 2013.

Now profits growth is set to slow from this breakneck pace, or so say City analysts. In 2017, a 5% rise is predicted. But the flying ace is expected to gain steam again from this year onwards (rises of 7% and 9% are forecast for 2018 and 2019 respectively).

IAG isn’t immune to its share of risk due to the the impact of terrorist acts on holidaymaker appetite, not to mention rising competition. But a forward P/E ratio of 7 times is disproportionately cheap in my opinion and could keep the share price surging.

This is not the only reason for investors to pile into the shares today, as the firm’s progressive dividend policy also throws out chunky yields.

The reward of 23.5 euro cents per share forked out in 2016 is predicted to have marched to 26 cents last year, and predictions of further payout expansion — to 29 cents and 31 cents in 2018 and 2019 respectively — result in yields of 3.9% and 4.2% for these years.

A snappy selection

The Vitec Group (LSE: VTC) is another splendid all-rounder I believe investors should check out today.

While the business’s earnings history has been pretty patchy of late (indeed, the 1% fall predicted for 2017 likely carries on this trend), the camera builder is predicted to get rolling again with improvements of 28% and 11% in 2018 and 2019 respectively.

This means that Vitec carries a tantalising prospective P/E ratio of 15.2 times and a sub-1 PEG reading of 0.5. And this is great value given that trading is strong across the business and that new product introductions, improving market conditions, and the likelihood of further M&A all bode well for future revenues growth.

What’s more, these bright earnings forecasts are expected to keep dividends moving northwards too, so 2017’s anticipated 28.6p reward is anticipated to rise to 30p this year and to 31.5p in 2018. Consequently share pickers can enjoy meaty yields of 2.5% for this year and 2.7% for the following period.

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

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