The 12 Fastest-Growing FTSE 100 Blue-Chip Shares
LONDON -- Investors are attracted to equity investment by the prospect of growth. So, which companies have grown earnings at the fastest rate in the past five years?
I scoured the FTSE 100 (INDEX: ^FTSE) to find fast-growing blue-chip shares. I've used the implied compound earnings per share (EPS) growth rate in my calculations. This measures the most recent EPS figure versus the same number from five years previous. It is not the average annual EPS growth.
Companies operating in and around the resources sector score particularly well.
EPS 5-Year CAGR %
Market cap (million pounds)
|AMEC (ISE: AMEC.L)||52.1||956p||3,121|
|Fresnillo (ISE: FRES.L)||44.5||1470p||10,551|
|Smiths (ISE: SMIN.L)||35.4||992p||3,894|
|Shire (ISE: SHP.L)||30.3||1910p||10,730|
p = pence.
Below, I've picked five companies from a selection of industries.
When CEO Samir Brikho joined AMEC in 2006 he set about a series of transformational changes at the company. Five years ago, AMEC was a U.K.-focused construction company. Today, the company delivers higher-value engineering services, mostly to the resources industry.
Similar to Petrofac and Weir, AMEC is a "picks and shovels" success story. Instead of making money by discovering naturalresources, AMEC has thrived by supplying expertise and services to the exploration and production companies themselves.
This has seen sales increase more than 50% in five years, and normalized EPS rise from 7.2 pence per share to 58.7 pence per share. The sharp rise in profits has been reflected in the dividend, which has risen from 12.2 pence per share for 2006 to 30.5 pence for 2011.
Analysts expect double-digit growth in both earnings and dividend at AMEC for the next two years. The shares today trade at 16.3 times 2011 earnings and 11.9 times the 2012 forecast.
2. Smiths Group
Smiths is a group of five high-tech industrial manufacturing companies. Products range from heating apparatus for residential homes to broadband antennae for commercial airlines.
Smiths dates back to 1851 and first joined the FTSE 100 in 1985.
Successful cost-saving initiatives across the group have seen a modest increase in sales deliver large profit growth. Between 2007 and 2011, Smiths increased turnover, on average, by 7.2% per annum. This was met by average annual operating profit growth of 14.7% a year.
Currency changes have also worked in Smiths' favor as sterling weakened relative to both the euro and U.S. dollar.
The outlook is for continued EPS growth at Smiths for the next two years. This puts the company on a price-to-earnings ratio for the forthcoming year of 11. The dividend is also expected to rise, giving a 3.8% yield.
Shire is one of the FTSE 100's great growth stories.
Founded in 1986, Shire is a pharmaceutical business that joined the FTSE 100 in 2000. Since 2006, Shire has grown sales from $1.8 billion to $4.3 billion. In that time, (normalized) EPS has increased from $0.43 to $1.58.
Today, one of Shire's biggest sources of revenue is treatments for ADHD (attention deficit hyperactivity disorder). This is a massive growth market, particularly in the U.S. For 2011, Shire announced a 27% rise in sales of its Vyvanse ADHD drug to $805 million for the year. In its most recent trading statement, Shire reported that it expects Vyvanse sales to hit $1 billion for 2012.
While growth at the company has been impressive, the shares today yield less than 1%. Though that may disappoint income-seekers, the profit growth is forecast to continue. Earnings are expected to continue rising for another two years. Today the shares trade at 14.6 times the consensus 2012 forecast, falling to 12.8 times for 2013.
4. Hargreaves Lansdown
2011 shareholder dividends at Hargreaves Lansdown hit 12.9 pence per share. In 2006 the payout was just 0.76 pence. For 2011, net profit was 91.8 million pounds. In 2006, net profit was just 6 million pounds.
Hargreaves Lansdown has enjoyed fantastic growth by establishing its own industry subsector. Essentially, the company acts as an investment supermarket and online financial adviser. Hargreaves Lansdown runs a huge range of investment services from online stockbroking to a managed funds service. This has produced phenomenal growth that has propelled Hargreaves Lansdown into the FTSE 100.
It is traditional for Fools to balk at a business run on investment commission. However, most savers and investors do not have the interest or appetite to direct their own savings and investments. Thanks to the enterprise of its founders, Hargreaves Lansdown has met this need. Shareholders in the company have been well-rewarded for their investment.
Not many companies have delivered a sevenfold increase in profits in the last four years. Fresnillo has.
The Mexico-focused miner has capitalized on the precious-metals boom to deliver massive growth. Today, the company is the largest primary producer of silver in the world and one of the largest gold producers in Mexico.
Analyst forecasts suggest, however, that the days of massive growth at the company may have passed. Consensus points to a 7% decline in EPS for 2012, before returning to modest growth in 2013. Prices of precious metals have been volatile in recent years. There is the possibility the final outcome will be very different. As always with natural resources companies, an investment in the shares incorporates speculation on the market price of raw materials being produced.
Finally, let me finish by adding that more share ideas can be found within this Motley Fool report: "8 Shares Held By Britain's Super Investor." The guide reviews the investing approach and portfolio of City dividend legend Neil Woodford and is free to download today.
Further investment opportunities:
At the time this
article was published David does not own shares in any of the above companies. The Motley Fool owns shares of Hargreaves Lansdown.The Motley Fool has adisclosure policy.
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