Why Hargreaves Lansdown is one of my top FTSE 100 growth stocks
The FTSE 100 is made up of the largest 100 companies listed in the UK, meaning that many companies within the index are mature firms that don't offer exhilarating growth prospects. For those looking for value, the FTSE 100 offers plenty of options, yet for those looking for strong growth, choices are more limited.
Having said that, there are still a few companies within the index that do have superb medium-to-long-term growth prospects. Here's a look at two FTSE 100 growth stocks that I rate highly.
Retirement savings crisis
Britain has a huge retirement savings problem at present, and in the coming years and decades, Brits are going to have to make a strong push to boost their savings and investments. Financial services company Hargreaves Lansdown(LSE: HL) looks well placed to capitalise.
Hargreaves Lansdown is a leader in its field with a 40% market share of the online investing sector. The group offers a fantastic, easy-to-use investment platform and as a result, enjoys a high client retention rate and an impressive return on equity of nearly 80%. Set to benefit as shares and funds rise in value over time, Hargreaves has considerable appeal as a growth stock.
A trading update released this morning revealed that the group is enjoying strong momentum across its business right now. For the four-month period to the end of April, the company welcomed 60,000 new clients, and generated net new business of £3.3bn. Net revenue for the period climbed to £151m, up from £131m for the same period last year and at the end of the period, assets under administration were £88.8bn, up from £79.2bn at the start of July.
While the outlook for Hargreaves does look very attractive, it's worth noting that the shares do trade at quite an expensive valuation at present. City analysts currently expect the group to generate earnings per share of 50.1p for FY2018, meaning that the stock's forward-looking P/E ratio is a high 37.6. As a result, while I'd like to own HL shares in my own portfolio, I'm going to keep the stock on my watchlist for now and wait for a more attractive entry point.
A cheaper growth star
One FTSE 100 growth stock I do believe trades at an attractive valuation right now is packaging specialist Mondi(LSE: MNDI). Despite rising 125% over the last five years and offering attractive prospects going forward, its shares currently trade on a forward P/E of just 13.7.
Mondi is a leader in packaging and paper and specialises in developing innovative, sustainable solutions for its customers. Since being spun off from multinational mining giant Anglo American in 2007, it has grown into a world-class packaging company, generating revenues of over EUR7bn last year.
The group has an excellent track record of growing its revenues and profits, and City analysts expect further growth this year. For FY2018, revenue is expected to climb 8% while net profit is forecast to rise 19%. The group's balance sheet is robust and return on equity last year was solid at 19%. Adding weight to the investment thesis is a prospective dividend yield of 3.1%.
Weighing up these factors, I see considerable appeal in Mondi shares at present. I believe MNDI is one of the better growth stocks in the FTSE 100.
Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.