With the global economy’s outlook highly uncertain at present, FTSE 100 stocks that offer relatively consistent growth could become increasingly popular among investors.
This could mean their valuations move higher at a time when the wider index is experiencing a period of drift. In fact, over the last six months, the FTSE 100 is little-changed, even though it has experienced a period of volatility.
As such, now could be an opportune time to buy these two stocks, with their growth prospects suggesting they have sound strategies.
The outlook for FTSE 100 pharma stock AstraZeneca (LSE: AZN) has improved dramatically over the last couple of years. After a period of seemingly endless declines in its profitability due to the impact of generic competition, the business is expected to post a rise in net profit of 13% in the current year.
While this may not convince all investors of the company’s long-term potential, the investment it’s making in its pipeline could produce sustained profit growth. And, since its performance is less correlated to the wider economy than it is for many of its FTSE 100 index peers, it may offer a degree of stability if uncertainty surrounding the world economy remains present over the coming months.
Of course, rising profitability may mean AstraZeneca is able to increase its dividend payments. Since it currently yields around 3.1%, the company may lack near-term income appeal relative to its FTSE 100 peers. But, with potentially favourable operating conditions, it could increase shareholder payouts at a fast pace over the long term. This could stimulate its total returns, which may increase investor demand for its shares.
Another FTSE 100 share that could offer a relatively dependable future growth rate is Experian (LSE: EXPN). The information services specialist has a solid track record of net profit growth, with its bottom line rising in each of the last three years.
Its recent updates have shown it’s on track to deliver further profit growth in the current year. Its investment in technology and innovation could help to strengthen its competitive position, while its rising numbers of consumer members provide the opportunity to cross-sell products.
Although Experian currently trades on a price-to-earnings (P/E) ratio of 28.8, its strong position within a range of economies means it could offer a resilient growth outlook as a result of its geographic diversity. Furthermore, investments in new business segments, such as health, could expand its opportunities into markets that offer fast-paced growth over the long run.
As such, at a time when the FTSE 100 faces an uncertain future, Experian may become an increasingly popular investment. This could help to catalyse its share price after its 27% rise in the last year and may mean it outperforms the wider index over the long run.
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Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca and Experian. 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.
Motley Fool UK 2019