There can’t be many FTSE 100 stocks that were badly hit by the US Nasdaq slump. But I reckon Intertek Group (LSE: ITRK) has to be one of them.
Earnings had been growing steadily, and only took a small pause during the pandemic. But then growth stocks went out of fashion.
We’re looking at a 15% share price fall in the past five years, which has knocked the Intertek valuation back quite some way.
Good year
Still, a trading update posted on 23 November looks like cause for cheer. At the time of writing, the Intertek share price is up 3% on the day.
The company does inspection, product testing, and certification. And it sounds like it’s had a good year in 2023.
At constant currency, total revenue is up 7.3% year to date, with like-for-like revenue up 6.3%.
The board reckons the firm is on track to hit its 2023 goals. And it affirmed full-year guidance for mid-single digit like-for-like revenue growth. We should also see margin improvement, and “strong free cash flow“.
Balance sheet
Net debt at the end of the year should be between £630m and £680m.
Now, I don’t like to see debt. It’s been a killer of many a growth stock investor’s hopes.
But for a company with a market cap of £6.3bn and annual revenue of more than £3bn, this seems like small change.
On the cash and liquidity front, Intertek gets a big thumbs-up from me.
Valuation
I might not place Intertek among the best value FTSE 100 stocks right now.
But then, we wouldn’t really expect a stock with this kind of earnings growth record down among the banks, would we?
In fact, with broker forecasts showing solid earnings growth to come, I think we could have a chance to buy a long-term growth stock at a very fair price here.
What was it ace investor Warren Buffett said? “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price“.
Forecasts
Forecasts suggest a price-to-earnings ratio of 20 for the full year, dropping to 16 by 2025.
That would be very close to the FTSE 100 average, and might just be a steal for a growth stock — especially with dividend yields of around 3% thrown in as a bonus.
I do think any market weakness could hit the demand for Intertek’s services, though. It did get away lightly, I think, in 2020. But I’d say the last few years of economic hardship could mean bigger risk now.
Price falls?
Sometimes, all it can take is seeing a growth stock slightly miss its targets, and that can send shareholders rushing for their ‘Panic sell’ buttons.
And that could mean the pain of a share price fall.
Oh, did I say pain? Sorry, no, I meant an even better buying opportunity.
I have higher priorities for my modest amounts of investment cash right now. But if Intertek shares stay low, I might just snag a few for a bit of diversification in 2024.
The post This is one of my top FTSE 100 growth stocks to consider buying today appeared first on The Motley Fool UK.
Like buying £1 for 51p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek Group Plc. 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.
