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I think these 2 FTSE 100 growth stocks can beat the market in 2020

If I had to pick just one growth stock to own for the next 12-months, sports retailer JD Sports (LSE: JD) would certainly feature high up on my list of possible investments.

JD’s growth over the past 10 years has been nothing short of fantastic. In the past five years, the company’s net income has increased by 550%, and over the past decade, the stock has produced a total return for investors of 42%, that’s enough to turn an initial investment of £1,000 in the retailer 10 years ago, into £62,000 today.

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I think it is unlikely that returns like this will continue going forward, because JD is a much bigger business than it was 10 years ago, and as the saying goes, elephants don’t gallop.

However, I still reckon that the stock has the potential to outperform the market over the next 12-24 months as it pushes ahead with growth plans to expand the business around the world.

International growth

Last year the group acquired underperforming US retailer Finish Line, and so far, this gamble has paid off. At the beginning of the year, JD reported a near 50% increase in total sales to £4.7bn and a 15% increase in pre-tax profits.

Analysts expect this growth trend to continue. The City has pencilled in earnings growth of around 9% for fiscal 2020 followed by an increase of 12% for 2021, putting the stock on a 2021 P/E of 21, which is slightly below JD’s five-year average valuation.

These growth rates imply that even if the company’s valuation stays where it is for the next 12-months, JD could outperform the FTSE 100, which has returned around 7% per annum for the past 10 years with earnings growth of 9% for its current financial year.

Buy and build

I think pest control group Rentokil (LSE: RTO) could also be on track to outperform the FTSE 100 in 2020. This is another earnings growth story. City analysts reckon that the company will report earnings per share of 14.2p in 2019, up 83% from 2018’s figure. Earnings per share are projected to grow a further 11% in 2020.

Based on these growth targets, shares in Rentokil look cheap compared to the growth the company is expected to produce over the next two years. I should also mention that the business has a track record of outperforming City expectations. So I wouldn’t rule out an improvement in these projections over the next 12 months.

Rentokil’s business is relatively defensive because the need for pest control around the world is only growing, at the same time, the company is complementing organic growth with bolt-on acquisitions, which should help management drive earnings higher for the next few years.

No matter what happens to the UK economy over the next few years, this sort of defensive investment is bound to be in demand as investors look to protect their portfolios from uncertainty. A dividend yield of 1.2% may be small but also sweetens the appeal.

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Rupert Hargreaves owns no share 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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