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

The Motley Fool
A stock price graph showing growth over time
A stock price graph showing growth over time

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.

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.

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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.