The DCC(LSE: DCC) growth story has been nothing short of remarkable. Only a few years ago this was a relatively unknown fuel distribution business. However, over the past six years, the company has grown into one of the UK's largest firms earning itself a place in the FTSE 100.
Slow and steady growth
DCC has built itself up over the years by reinvesting profits from operations back into the business. Organic growth, as well as bolt-on acquisitions, have helped net profit grow at a rate of around 19.6% per annum over the past six years.
For Fiscal 2018, City analysts are expecting the company to report earnings per share growth of 25%. According to a trading update issued today, the group is on track to hit this forecast, and it continues to complement growth with acquisitions.
A total of £670m has been spent on acquisitions so far this financial year and today the company announced the purchase of Elite One Source Nutritional Services in the US to help expand its DCC Health & Beauty Solutions arm.
Growth should continue
Over the past few years, management has shown that it can acquire and integrate businesses efficiently. As long as the firm maintains its acquisition discipline, I see no reason why the business cannot continue to grow steadily through bolt-on buys for the next decade or so, although some investors might be put off by the group's high valuation of 19.1 times forward earnings
Still, according to my figures, it won't be long before DCC grows into this valuation. Indeed, if earnings per share continue to grow 20% per annum, in five years, the company is on track to earn 854p per share, giving a 2023 P/E of 8.2. This is why DCC is one of my favourite FTSE 100 growth stocks.
Emerging market growth
Another of my favourite blue-chips is Coca-Cola HBC(LSE: CCH). As the primary bottler of Coca-Cola products in Europe, this company is relatively defensive by nature making it attractive for long-term investors.
That said, over the past five years, its growth has hardly been anything to get excited about. Reported earnings per share have increased at a rate of only around 5% per annum. Nonetheless, over the next two years, City analysts are expecting big things from the firm with earnings per share growth of 10% pencilled in for 2017 and 11% for 2018. This increase is a result of management efforts to aggressively cut costs and help improve profit margins. At the same time, it is also trying to expand into emerging markets such as Hungary, the Czech Republic, Russia, and Nigeria. During the third quarter of 2017 volumes in these markets increased between 3.5% and 5.1%.
One factor that has been holding it back during the past few years is debt and management has had to focus on debt reduction rather than shareholder returns. Efforts on this front are starting to yield results with net debt down by 50% over the past five years, and net gearing is now just 35%.
As debt falls further, I believe management will switch from debt reduction to cash returns to shareholders and these cash returns, coupled with steady growth should translate into healthy stock price gains.
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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.