Why this FTSE 100 growth stock could be a bargain

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Wolseley delivery fleet

Shares in Ferguson(LSE: FERG) were up 3% in early trading this morning as the plumbing and heating giant delivered another good set of results, driven by favourable residential and commercial markets in the US, which account for the majority of the group's revenues.

UK remains weak

The FTSE 100 giant, which changed its name from Wolseley in the summer, is the world's largest specialist trade distributor of plumbing and heating products to professional contractors, principally operating in North America and the UK.

For the financial year to 31 July, Ferguson reported revenue in the ongoing businesses of £14.9bn, compared to the £12.1bn it delivered in 2016, with trading profit coming in 8.7%, ahead of last year at £1.03bn. In light of the strong performance, management announced a £500m share buyback programme, and hiked the full-year dividend by 10%.

Flies in the ointment

There were a couple of flies in the ointment however. Industrial markets, which account for 7% of US revenue, were weak in the first half though recovered well in the second. The heating market also remained pretty weak here in the UK.

But the fact remains that around 89% of the group's trading profits are derived from US markets, where organic revenue growth has been strong. Here, the residential and commercial markets had a particularly good year, delivering growth of 9%-10% and 7%-8%, respectively. These end markets are easily the most important for the group, accounting for around 85% of total US revenue.

The shares are recovering from a slump during the summer, and investors would be best advised to stake their claim before the valuation gets too demanding. At 15.5 times forecast earnings for FY2018, I still see Ferguson as a rare blue-chip bargain, but for how long?

Open Access

Another blue-chip that looks undervalued at the moment is events and publishing giant Informa(LSE: INF). The FTSE 100 group provides products and services based on content, intelligence and connections to specialist communities worldwide. These include academic books and journals, data-driven intelligence publications and services, exhibitions, conferences and learning platforms.

Last week, management announced the acquisition of independent Open Access (OA) publisher Dove Medical Press for an undisclosed sum. The privately held company specializes in the publication of OA peer-reviewed journals across the broad spectrum of science, technology and especially medicine. It's hoped the deal will improve Informa's position and capability in the growing OA market.

Stable business

Over the years, Informa has demonstrated a solid reputation for consistent growth, and the acquisition of Dove Medical Press should help to add strength and capability to its existing OA portfolio, further increasing choice and flexibility for researchers across a widening range of subject areas.

I see the recent pull-back in the share price as a great opportunity for investors to buy into a relatively stable business at a very reasonable price. Informa trades on a relatively modest earnings multiple of just 14 for the current year to December.

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Bilaal Mohamed 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.