2 growth stocks absolutely smashing the FTSE 100
The FTSE 100 is up 9% year-to-date. That might not sound all that impressive but it’s actually above average for what is often regarded as a fairly pedestrian index relative to the S&P 500. However, this performance pales compared to that of two growth stocks.
Market beater
Telecommunications and mobile money service provider Airtel Africa (LSE: AAF) is having a very good 2025. Today, the gain stands at just under 60%. So much for the idea that ‘elephants can’t gallop’!
The market is clearly warming to the investment case here, helped by rising revenue and subscriber numbers.
More to come?
The shares now change hands for 18 times forecast earnings. That’s not outrageous but it’s high for companies in this space. It’s also above the average valuation in the FTSE 100.
Of course, such a price tag will be justified if it can continue to execute on its strategy, including the planned listing of Airtel Money. But perhaps the biggest draw for me is that a number of economies in Africa look set to grow rapidly in the decades ahead.
One concern I have is the fair dollop of debt on the balance sheet. That’s not ideal if inflation keeps rising. The shares also fell 8.4% in one day back in May, as investors reacted to severe currency headwinds.
The next trading update — due 24 July — will be worth dialling in for. But this might still be one for long-term investors to consider.
Even bigger gain
Another top-tier titan having a good year is international defence, aerospace and security firm Babcock International (LSE: BAB).
If I’d had the good fortune to buy £10,000 worth of the stock in January, I’d now have more than double this amount — yet more proof that we don’t need to back risky micro-cap stocks to make incredible returns.
The reasons behind this purple patch should be fairly apparent from just reading the daily news headlines. Geopolitical tensions and armed conflicts in Europe and the Middle East have tragically pushed governments — including our own — to increase defence spending.
Babcock has done what it can to capitalise on this, evidenced by its last set of full-year numbers. Revenue rose 11% in the year to March 2025. Underlying operating profit rocketed 53% to £363m.
With CEO David Lockwood stating that this is “a new era for defence“, it’s no wonder the shares have been bid up.
Strong tailwinds
A price-to-earnings (P/E) ratio of 20 means Babcock also trades above the FTSE 100 average. But the valuation isn’t particularly high for a company in the Industrials sector. As a comparison, fellow engineer Rolls-Royce‘s shares trade on a P/E of 42. We shouldn’t judge an investment’s potential purely on one metric. But if we did, I’d know which would keep me up at night.
Having substantially reduced its debt pile, I wonder if the biggest risk to the share price — aside from unexpectedly losing any lucrative contracts — is that some holders start taking profit.
But there’s no suggestion that defence stocks are likely to run out of steam soon. So, I think this could be another growth stock worthy of further research.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc and Rolls-Royce 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.
