However, despite the group’s explosive growth over the past decade, it looks as if it is now running out of steam. Analysts and regulators alike are starting to ask questions about the firm’s fat 60%+ profit margins while consolidation, as well as competition in the asset management market, is threatening to pull customers away from Hargreaves. 

City analysts are expecting growth to slow slightly this year, with earnings per share growth of 12% pencilled in for the fiscal year ending 30 June 2018, down from 20% last year. Despite slowing growth, shares in Hargreaves trade at a relatively demanding forward P/E of 27.4, which does not leave much room for manoeuvre if earnings rises slow significantly. 

As the outlook for Hargreaves darkens, I believe that it could be time to take profits and instead buy high-growth stock Total Produce (LSE: TOT). 

Large growth market 

Unlike Hargreaves, which is facing increasing competition and regulatory scrutiny, Total Produce continues to expand unhindered and today reported adjusted profit before tax of 11.8% year-on-year for the six months to 30 June. Revenue was up 12.2% year-on-year and management reiterated its target for earnings per share to grow by 12% to 13% for the full year. 

City analysts are expecting the company to report earnings per share of 12.7c, or 12p, for 2017, indicating that the shares are currently trading at a forward P/E of 16.8 times. 

Total Produce is one of the world’s largest fresh produce providers operating out of 26 countries with a global infrastructure of over 120 facilities across Europe, India and North America. In total, the firm grows, sources, imports, packages, markets and distributes over 300 lines of fresh produce. This business is relatively defensive. As the world’s population and wealth grows, demand for fresh produce, and as a result Total’s services, should continue to expand. 

Over the past five years, the group has seen revenue rising by nearly 100% and management is working to complement organic growth by acquiring other businesses in the highly fragmented global food distribution market. Indeed, alongside today’s results, Chairman, Carl McCann noted: “The Group has continued its international expansion with a number of significant North American transactions. It increased its shareholding in the Oppenheimer group (‘Oppy’) from 35% to 65%. In addition, Oppy concluded important strategic agreements with the New Zealand based T&G Global. The Group’s Los Angeles headquartered Progressive Produce business increased its scale with the acquisition of Keystone Fruit Marketing. The Group is actively pursuing further investment opportunities.”

The bottom line

So, compared to Hargreaves, Total looks to be a better growth buy. Not only is the company’s potential larger, but its valuation is more attractive. The one downside is that as Total is reinvesting the majority of its earnings back into operations to fund growth, the company’s dividend yield of 1.4% leaves much to be desired. Hargreaves, on the other hand, supports a dividend yield of 3.2%. 

The post One FTSE 100 stock I’d sell to buy this millionaire-maker stock appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.