Why I'd sell this turnaround stock to buy a 'secret' FTSE 100 growth stock

Shares in ITE Group(LSE: ITE) are down more than 40% from their peak in October 2013, after several years of crashing earnings per share.

There has been a slow share price recovery in the past two years, as the firm is engaged in a "3-Year Transformation & Growth (TAG) Programme" -- but looking at Tuesday's full-year results, I'm not feeling any great attraction right now.

The company, which organises trade exhibitions and conferences in Russia and the surrounding central Asian region, reported a 13.5% rise in revenue, but that led to a 13.4% drop in headline pre-tax profit and a fall in headline earnings per share from 10.7p to 8.1p. The full-year dividend was cut from 4.5p per share to 4p, to yield just 2.3% on the current 177p share price.

Tardy refocus

Mark Shashoua, in his first full-year as chief executive, was upbeat about "the successful rollout of the first phase of our TAG initiatives and our decision to focus on Core events that have the greatest capacity for growth". But one thing that does disturb me is that it's taken this long for the new strategy to come into effect, and that it needed new management first -- the company also has a new chief financial officer in Andrew Beach. I reckon ITE should have been reporting the first phase of its turnaround strategy at least a year ago.

Analysts expect earnings per share to remain flat in the current year, so at least the fall would be arrested, but that still leaves the shares on a forward P/E multiple of more than 21.

I think that's too expensive right now, and that there are far better investment opportunities out there.

FTSE 100 growth

You might not usually expect to unearth many hot growth prospects in the FTSE 100, as even the smallest company in London's top index already has a market cap of nearly £3.5bn.

But I reckon otherwise, and I see private hospitals group Mediclinic International(LSE: MDC) as a serious growth candidate that I can't help feeling a lot of investors have overlooked -- possibly because it's only had its London listing since February 2016 after a merger with Al Noor Hospitals.

Since joining the FTSE, Mediclinic's share price has fallen by 40%, and that won't have helped. But I see decent long-term growth, coupled with a progressive dividend policy that could easily turn this company into a cash cow over the next decade.

Big debt

On the downside, there are concerns about the company's debt pile, which stood at £1,687m at the interim stage announced on 16 November, while underlying earnings fell. But first-half revenue actually rose by 10%, and the weak profit figure was largely down to tough conditions in Switzerland and Southern Africa.

Life on the LSE got off to a lacklustre start -- EPS dropped by 19% for the year to March 2017, and there's a further fall of 3% forecast for the current year.

But there's earnings growth pencilled in for March 2019, with a 21% rise that would drop the P/E to 16, and that's not a bad valuation for a growth prospect.

And on the debt front, the company is very much in the net investment stage right now, and once it gets closer to maturity I can see its strong cash flow being used to pay that down and then help get the dividend growing strongly.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended ITE Group. 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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