Today, the FTSE 100 enjoys a fresh injection of blood as four new companies entered the index – Avast, GVC Holdings, Homeserve, and Kingfisher.
All are enjoying the attention, with their shares jumping even though the FTSE 100 index is down. The Avast (LSE: AVST) and HomeServe (LSE: HSV) share prices are up around 4%, continuing strong recent runs. They still look tempting buys to me.
Momentum on their side
Avast calls itself “the world’s leading consumer cybersecurity company,” with 20 offices worldwide, including in London and Silicon Valley. The Czech-based company floated in London two years ago at 246p. Its share price has since doubled, trading at 525p today.
Keeping people safe online is big business as the fraud threat is, unfortunately, forever. Avast’s 2016 acquisition of rival AVG turned the FTSE 100 newbie into a cybersecurity giant. It serves consumers and small businesses, and is best known for its Avast antivirus software.
The Avast share price has momentum on its side, bouncing back sharply from the March crash. It now trades 60% higher than just three months ago.
This FTSE 100 tech play looks an attractive growth and income stock, given current momentum and the size of the market it’s pitching at. It isn’t even that expensive, trading at 19 times earnings. You also get a dividend, with the stock yielding a decent 2.3%.
The £5.4bn FTSE 100 group has almost 13m paying customers. It’s expanding into network and smart home security, and plans to grow further through targeted M&A.
Avast boasts high barriers to entry and strong competitive moats, while its subscription-based business model offers high cash and revenue visibility. The coronavirus pandemic should have little impact, as people are more dependent on their screens than ever, while fraudsters are more active.
As more established FTSE 100 names struggle, I would suggest turning your attention to the new and fast-growing kid on the block.
I’d buy this FTSE 100 stock too
Home emergency repairs company HomeServe is another FTSE 100 new entry that’s looking to accelerate growth. Its share price has also jumped 60% in just three months. Over five years, it’s up an impressive 200%. The home emergency cover specialist has also weathered the coronavirus in decent shape, as it was declared an essential service. Staff worked on throughout. No firings, no furloughs.
International expansion should drive future growth and revenue prospects. The FTSE 100 new entry already has more than 8m customers in the US, more than half of its total, and is targeting Japan next.
It’s growing fast, with sales up 10% in the year to 31 March while underlying profits rose 12% to £181m.
The £4.3bn FTSE 100 group currently yields around 2%. The one sticking point is that it is expensive, trading at around 30 times earnings. That shows just how well the HomeServe share price has done, and how highly investors rate its prospects.
You won’t find many better growth stocks on the FTSE 100 than these two right now.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.