2 FTSE 100 growth stocks I think look cheap and would hold for the next 5 years

Growth focused investors should take a look at these two FTSE 100 (INDEXFTSE:UKX) stocks, says Andy Ross.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Ashtead (LSE: AHT) is the one that got away. I owned it many years ago when the share price was significantly below what it is now. However, there is a silver lining for investors wanting to get in on the act and grab a slice of this company because I think it’s entirely possible right now to buy the shares at a good price, and I am personally tempted to dive back in myself.

Building itself up

Ashtead is an equipment rental company, operating in the US primarily, but also in the UK. Despite strong growth for many years, the shares now trade at a reasonable P/E ratio of 13, far lower than this time last year. 

Last week, the company posted a 20% jump in full-year pre-tax profit, driven by continued strong performance in North America. In the year to 30 April, underlying pre-tax profit rose 17% to £1.1bn while revenue increased 18% to £4.1bn. Earnings per share rose by 33%. 

Its revenue from rentals grew 18% during the year to £4.1bn, helping the company expand despite concerns of an economic slowdown, which would undoubtedly hit the construction industry hard – as it has done in the past. Indicating confidence in the future, the company proposed a final dividend of 33.5p, taking the full-year dividend to 40p a share, a 21% increase.

As the larger business within the group, what happens at Sunbelt, the US arm of the company, really matters. It saw revenue was up 20% in the year to $4.99bn, with rental-only revenue from the division 22% higher. At the A-Plant business in the UK, rental-only revenue was up 4% at £357m, while total revenue edged up 1% to £475m.

The rental group’s share price will be further supported by share buybacks. Ashtead has already spent £675m under the share buyback plan announced in December 2017 and has updated that it expects to spend at least £500m on share buybacks this year and next.

Money, money, money

St James’s Place (LSE: STJ) operates in a very profitable market: wealth management. As the population ages, the services it provides will only become ever more sought after as people look to make the most from their pensions and other savings. 

The wealth manager’s 2018 annual results showed just why this company should be considered as a growth prospect. The full-year dividend rose 12.5%, operating profit was up 9%, and cash was up 10%. It had net inflow of funds under management of £10.3bn (2017: £9.5bn) and funds under management rose to £95.6bn (2017: £90.7bn). These increases are both good news for investors as it means St James’s is well positioned to make more money from its clients. Scale counts in wealth management and in the first quarter of 2019, its funds under management reached a record £103.5bn, again a good indicator of future success.

Given increased pension freedoms, an ageing population and the growth of the wealth manager itself, I think St James’s Place looks like a high-potential growth stock to hold for the next five years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andy Ross 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.

More on Investing Articles

Investing Articles

Here’s how I’d aim for a ton of passive income from £20k in an ISA

To get the best passive income from an ISA, I think we need to balance risk with the potential rewards.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

2 FTSE 100 stocks I’d buy as the blue-chip index hits record highs

This Fool takes a look at a pair of quality FTSE 100 stocks that appear well-positioned for future gains, despite…

Read more »

Satellite on planet background
Small-Cap Shares

Here’s why AIM stock Filtronic is up 44% today

The share price of AIM stock Filtronic has surged on the back of some big news in relation to its…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

At a record high, there can still be bargain FTSE 100 shares to buy!

The FTSE 100 closed at a new all-time high this week. Our writer explains why there might still be bargain…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After profits plunge 28%, should investors consider buying Lloyds shares?

Lloyds has seen its shares wobble following the release of its latest results. But is this a chance for investors…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Something’s changed in a good way for Reckitt in Q1, and the share price may be about to take off

With the Reckitt share price near 4,475p, is this a no-brainer stock? This long-time Fool takes a closer look at…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This new boost in assets might just get the abrdn share price moving again

The abrdn share price has lost half its value in the past five years. But with investor confidence returning, are…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

As revenues rise 8%, is the Croda International share price set to bounce back?

The latest update from Croda International indicates that sales are starting to recover from the end of 2023, so is…

Read more »