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Considering the huge gains made across the pond in 2024, UK-focused investors will be hoping for a successful 2025. With this in mind, I have been scanning FTSE 100 index of growth stocks that investors with a goal of beating the market in the next 12 months may want to consider buying now.
The opposite choice
The giant of pest control The first Rentokil (LSE: RTO) may seem like an odd choice. The owners had a poor 2024 and their shares ended the year 7% below where they started. However, it could have been worse. By mid-October, that loss was over 20%!
Much of the poor form has been dealing with concerns over rising costs and issues surrounding its acquisition of US rival Terminix. In October, the company announced that synergies from the final merger would be delayed by two to three months. Obviously, this wouldn’t go down well with an already skittish market. Any further delay can make a bad situation worse.
It is for sale
If there’s a downside to all of this, it’s that Rentokil Initial’s valuation has fallen.
Indeed, a price-to-earnings (P/E) ratio of 18 does not sound a ‘siren’. But it’s well below the company’s five-year average of 34.
It is important to note that there is not much interest from short sellers in the stock either. Put another way, few traders seem to believe that the stock price will continue to fall.
I’m inclined to agree, especially if the administration’s cost-saving strategy (announced in October) has worked. Any chink of light in March’s full-year results could see demand for the stock rise.
Growing interest
Property portal Rightmove (LSE: RMV) could also have a good 2025. In fact, I wonder if the share price will do particularly well in the first few months due to potential buyers looking to avoid April’s stamp duty hike.
Supporting this, the Royal Institution of Chartered Surveyors recently reported that its members – estate agents and surveyors – were receiving more inquiries and seeing more sales taking place. I think this all bodes well for the next set of numbers for Rightmove’s full year, which should end at the end of February.
In contrast to Rentokil Initial, the stock outperformed in 2024, benefiting from interest rates finally starting to ease. However, the real improvement came as a result of repeated, if ultimately rejected, takeover bids REA Group.
Quality stock
Of course, since the talk of taking shares is over, there is an argument that the shares may lose their strength. Longer-than-expected inflation, and the effects this could have on interest rates, could affect sentiment. And what happens when that increase in stamp duty begins?
As things stand, Rightmove shares aren’t exactly cheap, changing hands for 22 times forecast FY25 earnings. That’s a pretty high price tag compared to standard UK stock.
However, as with Rentokil Initial, that valuation is well below the company’s average P/E over the past five years. I also think it is fully deserved given the amazing £5bn cap margins, strong financials and market dominance.
And who’s to say another takeover won’t be done by 2025?
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