A handful of FTSE 100 stocks have stood out as champion investments over the past decade. One of these is GVC Holdings (LSE: GVC). Over the past few years, this company has grown from a small upstart into one of the world’s largest online gaming platforms. It doesn’t look as if this trend is going to come to an end anytime soon.
The business is a sector leader in the provision of online gaming solutions. It also owns a portfolio of brick-and-mortar stores. As its global market continues to expand, GVC may be able to use its existing footprint to drive further growth. And as it does, it seems highly likely the FTSE 100 stock will generate high total returns for investors in the years ahead.
FTSE 100 growth champion
GVC has already been an outstanding investment. Over the past 10 years, the stock has produced an average annual return of 27.2% for investors. Over the same time frame, the FTSE 100 has yielded an average total return of 5.8%.
The company has grown through a combination of organic growth and acquisitions. Following a string of deals in the past few years, revenue has exploded from £180m in 2014 to £3.6bn for 2019.
Some investors might question whether or not the FTSE 100 growth champion can keep up this sort of growth. It seems likely it can. Online gambling is a very lucrative business, and GVC is a cash machine. Last year, for example, the firm generated £260m in free cash flow after investing £170m in growth. Most of this free cash flow was returned to investors via dividends.
Having conquered the European gambling market, GVC has now set its sights on the US, forming a partnership with casino giant MGM Resorts. The group has invested hundreds of millions of dollars to meet its goal of becoming the market leader in the rapidly expanding US sports betting and gaming market.
Estimates vary, but many analysts expect the US gaming market to be worth several billion dollars in a few years. If the FTSE 100 company can capture a significant share of this market, its growth may only just be getting started.
Despite all of the above, it may not be all smooth sailing for GVC in the years ahead. Gambling is a highly regulated and controlled market. That means the company has to follow regulators’ strict demands, or could lose its licence.
Also, the coronavirus crisis has had an impact on the group. Its latest trading update revealed an 11% decline in net gaming revenue for the six months to 30 June.
Still, despite this, the company’s growth track record and cash generation suggest it’s well-placed to capitalise on any market opportunities that may emerge over the next few years. As such, it may be worth snapping up a share of this FTSE 100 growth stock as part of a well-diversified portfolio today.
Rupert Hargreaves 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.