Stock market

I would consider buying this FTSE 100 growth stock for 2024 and beyond.

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So there it is FTSE 100 For profit, and FTSE 250 To find growth stocks, right?

Well, right now the FTSE 250 has high dividend yields of 8% and more. And in the FTSE 100, I see stocks at very low PEG ratios, which is an important measure of growth.

Growth assessment

The price-to-earnings (P/E) ratio compares a stock’s price to expected earnings. Other things being equal, less is better. But a better earnings growth forecast will usually mean a higher P/E.

That’s where the PEG comes in. Anything below one can indicate a potential growth buy. And if we see 0.7 or less, it could be extra special.

FTSE 100 growth

The following table shows some FTSE 100 stocks that look like attractive PEGs to me. And some of them surprise me. It shows the earnings per share (EPS) growth forecast for the next three years along with the P/E and PEG ratios.

Stock P/E
2024
EPS
Development
2024
address
2024
P/E
2025
EPS
Development
2025
address
2025
P/E
2026
EPS
Development
2026
address
2026
Lloyds Banking Group (LSE: LLOY) 9.5 -23% n/a 7.7 +23% 0.33 6.4 +19% 0.34
Natwest Group 8.4 -19% n/a 7.8 +8.0% 0.98 6.9 +14% 0.49
Marks and Spencer 12.5 +22% 0.57 11 +15% 0.73 10.2 +7.5% 1.4
Associated British Foods 14.5 +40% 0.36 13.5 +5.1% 2.6 13 +6.0% 2.1
Legal and General 11.2 +209% 0.05 9.9 +14% 0.71 9.0 +9.6% 0.94
Sources: Yahoo!, MarketScreener

One thing is immediately clear from this table — 2024 is a very unusual year.

Both banks, Lloyds and NatWest, are set for record revenue falls this year. And that’s not what makes progress.

But just look at how low the forecast PEG ratio is for 2025 and 2026! It’s the kind of thing that even small-cap growth seekers will be drawn to – and these are both top FTSE 100 banks.

Profit or growth

It also shows that the distinction between income investing and growth investing is not always clear.

I mean, on top of those low forward P/E and PEG measures, Lloyds and NatWest offer potential dividend yields of 5% and 5.2% respectively.

Both reported revenue drops in the first quarter, but they are both optimistic about the future.

Even in this challenging year, Lloyds expects to report a CET1 ratio of around 13.5%. This is a key measure of liquidity, and will continue to strengthen. And its P/E looks set to fall to around half the FTSE 100 average.

Decision

Then we see Associated British Foods at lower PEG this year as it strengthens again, but then the upside pulls away.

And these contradictions sum up the current state of the market for me. I wouldn’t buy any of them just on these measures, and I’d have to research the potential benefits and risks of each.

But sentiment and rational assessment seem to suggest they are miles away for some FTSE 100 stocks at the moment. And that can mean a great time to look for anomalies and grab bargain purchases.


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