Why I’d buy this secret growth star alongside this FTSE 100 growth share

This FTSE 100 (INDEXFTSE: UKX) company could offer a favourable risk/reward opportunity along with another growth share.

| 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.

While the FTSE 100 may be trading within 300 points of its record high, there are still growth opportunities on offer. Certainly, valuations are now generally higher than they have been in previous years. But with the prospects for the global economy being relatively positive, there could be improving financial performance ahead across a number of different sectors.

With that in mind, here are two shares that could offer upbeat prospects. Their financial outlooks appear to be robust, and they could offer investment potential over a multi-year timeframe.

Margin of safety

Reporting on Thursday was London-focused real estate investment trust (REIT) Great Portland Estates (LSE: GPOR). The company’s trading in the quarter to 30 June 2018 was positive, with it signing 11 new lettings at an annual rent of £2.5m. It also settled nine rent reviews which secured £5m per annum, 20.8% above the previous passing rents. There remains a reversionary potential of 9.2%, which the company is set to exploit over the medium term.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Although macroeconomic conditions remain uncertain ahead of Brexit next year, the prospects for the company appear to be encouraging. It has experienced positive occupier interest across its three newly-committed development schemes. They are already 11% pre-let, while the company’s development programme continues to progress as planned.

With a price-to-book (P/B) ratio of 0.8, Great Portland Estates appears to be undervalued at the present time. This helps to reduce its overall risk from an investment perspective, while bottom-line growth forecasts of 7% per annum in each of the next two years indicate that it could deliver a rising share price. With a strong asset base and sound strategy, it could offer high total return potential.

Improving outlook

With the FTSE 100 making gains in recent years, it is unsurprising that some shares have high valuations. One example is consumer goods company Reckitt Benckiser (LSE: RB), with it having a price-to-earnings (P/E) ratio of 19.4. This may suggest to some investors that it is overvalued, but the reality is that the company could enjoy stunning growth in the long run.

The acquisition of Mead Johnson and the subsequent restructuring that has been undertaken by the company could offer growth catalysts in future. With demand for consumer goods in China and elsewhere in the emerging world forecast to rise, Reckitt Benckiser may be able to capitalise on the investment it has made in such areas in recent years.

With the company’s bottom line forecast to rise by 7% in the next financial year, it continues to perform relatively well. Its diverse mix of brands and geographic exposure could help the reduce risk, while its growth potential means that possible rewards could be high. As a result, it may be a worthwhile investment – even though there are likely to be cheaper options available elsewhere in the FTSE 100.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

Peter Stephens owns shares of Reckitt Benckiser. 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

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Can Aston Martin shares make it through to end of the year?

Aston Martin shares have slumped as the iconic brand has faced challenge after challenge following the pandemic. Will it survive…

Read more »

Investing Articles

£5,000 in savings? Here’s how an investor could aim for £12k annual passive income

With just a modest lump sum of savings and small monthly contributions, an investor could work toward a decent passive…

Read more »

Investing Articles

£9K of savings? Here’s how an investor could target £490 a month of passive income

Taking a long-term approach based on buying quality shares, our writer shows how someone could use £9k to unlock sizeable…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m taking Warren Buffett’s advice for handling volatile stock markets

Christopher Ruane put one of Warren Buffett's well-known investing concepts into action this week amid the market turmoil. Here's how.

Read more »

Investing Articles

Here’s where I think the Lloyds share price could be at the end of 2026

Donald Trump may have clouded the near-term economic outlook, but the Lloyds share price could gain further over the next…

Read more »

Investing Articles

After falling 17% in a month, Tesco shares yield 4.3% with a P/E of just over 11!

Tesco shares have been among the most solid on the FTSE 100. But after being caught up in market turbulence,…

Read more »

Investing Articles

1 beaten-down FTSE 100 share I just bought again — and again!

The FTSE 100's had a rocky few weeks. Our writer has been repeatedly adding to his shareholding in one well-known…

Read more »

Investing Articles

At what point would the Rolls-Royce share price become a bargain buy?

The Rolls-Royce share price was in pennies just a few years ago and has since grown enormously. Is it at…

Read more »