2 monster growth stocks smashing the FTSE 100

Breedon Group(LSE: BREE), one of the UK's primary suppliers of aggregates for the construction industry, is in my opinion, one of the best-managed businesses trading on the London market today.

Over the past eight years, shares in the company have added 491%, smashing the FTSE 100's performance of just 31% over the same period as earnings have exploded.

A building boom across the UK, coupled with select acquisitions have helped Breedon grow earnings per share at a compound annual rate of 47.1% over the past six years. And today, the company has announced another substantial acquisition to boost its presence in the UK construction industry.

Expanding overseas

Breedon has agreed to acquire Lagan Group Limited, a leading construction materials business based in Belfast, for a cash consideration of £455m.

Lagan, which has operations across the UK and Ireland, will add nine additional quarries and 13 asphalt plants to Breedon's empire, as well as nine ready-mixed concrete plants. Last year, the firm generated earnings before interest tax depreciation and amortisation (EBITDA) of £46m and is expected to be double-digit accretive to Breedon's underlying earnings per share in the first full year following completion.

As well as the earnings growth, management believes this deal provides the firm with "a stronger platform from which to pursue further organic growth and bolt-on acquisition" as it takes the group into the Irish market and cements its position as the most significant construction materials group in the UK and Ireland.

Further growth ahead

Following the deal, I believe Breedon's record of growth is set to continue and the stock's valuation of 16.9 times forward earnings does not seem too demanding.

That said, the one thing I am concerned about is the company's debt, which after today's deal will have risen to 2.6 times EBITDA. However, management is committed to reducing debt to one times EBITDA by 2020. With this being the case, I don't believe debt is a threat to the business just yet.


Another growth stock that has been smashing the FTSE 100 recently is Hostelworld(LSE: HSW).

Over the past 12 months, shares in this hostels operator have added 32% excluding dividends, compared to the FTSE 100's return of -2%.

As my Foolish colleague Kevin Godbold recently pointed out, there's a lot to like about this business including its debt-free balance sheet, and rapid earnings growth. A few days ago the firm reported earnings growth of 60% for 2017 thanks to its differentiated offering in the hostel market, which is expected to grow at around 5% a year until 2020.

The company has also attracted the attention of the star hedge fund manager Neil Woodford, who seems to like the shares for their income potential -- both the Neil Woodford Equity Income fund and his Income Focus Fund own the stock.

It's difficult to argue with this view as Hostelworld is an income champion. Last year, the group distributed EUR0.28 per share to investors for the full year, giving a yield of 6.1% and analysts are expecting the firm to pay out EUR0.16 in 2018 year for a yield of 3.7%. The company has a history of beating forecasts when it comes to dividends, however, so this might turn out to be a conservative forecast.

With a debt-free, cash-rich balance sheet, the group can certainly afford to pay out more to investors.

Buy-And-Hold Investing

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Rupert Hargreaves owns no share 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.