Today, I'm taking a look at two solid FTSE 100 stocks with serious upside potential.
Value creation model
Shares of Irish building materials company CRH(LSE: CRH) edged higher this morning, after the firm published a strong start to 2017. First quarter sales rose by 4%, against tough comparators from the same period last year, thanks to steady global growth and improving construction activity.
CRH is also reaping the rewards from its acquisition-heavy strategy, which has enabled it to significantly expand its global business and diversify its revenues. And as a cornerstone of its value creation model, CRH actively recycles capital from lower growth areas into faster growing and more profitable businesses, which reduces its reliance on debt financing.
With a net debt-to-EBITDA ratio of just over 1.7 times, CRH has one the strongest balance sheet in the sector and the financial flexibility to do further deals. Looking forward, CEO Albert Manifold said further acquisition opportunities will likely arise in the coming years, as lenders are beginning to put more pressure on CRH's more indebted rivals to sell assets, as interest rates in the US rise.
Looking ahead, the company is well placed to benefit from increasing infrastructure spending and construction activity in the United States, where it makes more than a third of its underlying profits. In today's announcement, the company said it expects EBITDA for the seasonally-weak first half to be ahead of last year's figure of EUR1.12 billion, with further progress likely in the second half of the year.
City analysts expect CRH's adjusted earnings per share to rise by 33% this year, resulting in a forward P/E of 17.9 times, which is broadly in line with sector peers. For 2018, analysts expect further earnings growth of 15%, and that gives its shares a more modest forward P/E ratio of 15.6.
Huge growth potential
RELX(LSE: REL), the world's largest provider of scientific and legal information, is another growth stock to watch out for. Its specialist focus on professional and business customers across global industries and transition from print to digital should lay the foundation for serious revenue growth long into the future.
Indeed, the huge growth potential of its information and analytics offering was laid bare by its recent full-year earnings. Underlying revenue growth accelerated to 4% in 2016, up from 3% in the previous year, while adjusted operating profit rose by 16%, in sterling terms, to £2.1bn.
And thanks to sterling's weakness, RELX also announced a 21% increase in its full-year dividend to 35.95p. Looking forward, RELX expects to grow its dividend broadly in line with adjusted earnings per share, whilst maintaining dividend cover of at least two times over the long term.
City analysts expect RELX to follow last year's solid performance with a 13% increase in adjusted earnings per share in 2017, followed by an 8% advance in 2018. RELX currently trades at a forward P/E of 19.2 and supports a yield of 2.4%.
Jack Tang has no position in any shares 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.