One FTSE 100 growth stock I'd buy and one I'd avoid

The London Stock Exchange Group(LSE: LSE) today released an upbeat interim management statement that should give investors confidence in its future outlook.

Third quarter revenues increased by 18% on the same period last year, from £376m to £443m, as strong growth in information and post-trade services helped to sustain its double-digit advance in year-on-year revenues. These figures show how resilient trading has been for the group in the wake of its aborted merger with Deutsche Boerse and ongoing Brexit uncertainty.

CEO steps down

Still, shares in the group fell by as much 2% today, as its recent robust financial performance was overshadowed by news that Xavier Rolet would be stepping down as chief executive of the group by the end of December next year.

Rolet joined the group from Lehman Brothers in 2009 and under his tenure, the LSE has transformed itself from a company which was overly reliant on its sluggish traditional equities business into a fast-growing diversified financial markets infrastructure business. He has achieved this by embarking on a series of ambitious acquisitions, pushing the group deep into post-trade services such as clearing, custody and settlement -- a booming area benefitting from new derivative rules which have been driving activity towards centralised venues.

Future growth

Looking ahead, I expect his successor will stick to its current strategy of reducing its dependence on traditional equity markets and continue to develop new products and services. I reckon this should help to deliver future growth momentum to the company and increased cash returns to shareholders. City analysts are optimistic too, with forecasts of earnings-per-share growth of 22% and 13% in 2017 and 2018, respectively.

Overall, the LSE has many attractive qualities and it seems as if the company's growth story is far from over.

Too expensive

Meanwhile, I'm less sanguine about Bristol-based investment management firm Hargreaves Lansdown(LSE: HL). At 31 times forward earnings this year, shares in the company seem too highly rated.

Although Hargreaves is seeing strong growth in assets under administration, the company also faces a number of challenges. Firstly, it's important to note that the firm has benefitted from a number of one-off factors which should not recur, but helped to compensate for a weak macroeconomic environment, such as the introduction of the Lifetime ISA and the increased ISA allowance.

Second, market conditions are getting more competitive as new entrants threaten to challenge incumbent firms with drastically lower fees. For example, US fund manager Vanguard, which has historically shied away from dealing directly with retail investors, recently launched its own platform to give investors direct access to Vanguard's range of funds at a much lower annual administration fee of just 0.15%.

And lastly, the stock's income prospects fail to impress, after a review into its requirements by the Financial Conduct Authority found it had insufficient regulatory capital surplus. As such, Hargreaves did not pay a special dividend this year, which meant total dividends in 2017 fell 15% on the previous year, to 29p a share, giving its shares a lacklustre 1.9% yield.

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Jack Tang has no position in any 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.

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