This overlooked UK growth stock just smashed Rolls-Royce – what have I missed?
Thereâs only one FTSE 100 growth stock investors are talking about today. Itâs Rolls-Royce (LSE: RR), of course, up another 5% this morning after a superb set of full-year results. Pre-tax 2025 profits jumped 46% to £3.35bn, while free cash flow hit £3.3bn. CEO Tufan Erginbilgiç also thrilled investors with a £2.5bn share buyback.
Iâm thrilled too, as the FTSE 100 aircraft engine maker has pride of place in my Self-Invested Personal Pension (SIPP). But with a sizeable stake already, Iâm not planning to buy more. I donât want to get too top heavy on one stock. So Iâm looking elsewhere for growth. And today thereâs a blue-chip stock beating Rolls that I’ve hardly ever looked at. Its name?
Howden shares lead the FTSE 100 today
Howden Joinery Group (LSE: HWDN). Donât laugh. The trade kitchen supplier doesnât have the clout of Rolls-Royce. But its shares are leading the FTSE 100 this morning, up almost 8% in early trading. Sadly, its long-term record isnât quite up to Rolls-Royce levels.
Even after today’s jump, the Howden share price is up just 4% over the last year and a modest 18% over five years. Investors have got dividends on top, but with a trailing yield of 1.78%, the total return hasnât been transformative. By contrast, Rolls-Royce is up 113% over one year and 1,069% over five.
Today, the £5bn company reported group revenues up 4.1% to £2.42bn, with UK sales up 3.8% despite a difficult market. The cost-of-living squeeze and a slower housing market continue to weigh on kitchen demand. Itâs doing better overseas. International revenue climbed 13.5% as Howden expands in France and the Republic of Ireland.
Gross margins improved by 110 basis points to 62.7%, as revenue growth and sourcing and manufacturing efficiencies offset cost inflation, delivering £41m of productivity savings. Pre-tax profit rose 5.1% to £344.9m. Howden has launched a new £100m share buyback and lifted its full-year dividend to 21.9p per share, up 3.3% from 21.2p.
Investors are happy today, but the longer-term picture is less certain. Howden said the UK kitchen market is likely to be broadly flat year on year, although this follows years of decline. It remains on track to meet 2026 forecasts.
Rolls-Royce shares are impossible to ignore
With a price-to-earnings ratio of 18.5, it isn’t obviously cheap. Thereâs a reason Iâve never switched onto Howden. It may be worth considering for patient long-term investors, but lacks excitement. Especially compared to Rolls-Royce, which has so much more in its locker. It’s guiding for £4bn-£4.2bn of underlying operating profit in 2026 and £3.6bn-£3.8bn of free cash flow.
While profit-takers may emerge in the days ahead, these are exceptionally strong results and the long-term outlook remains compelling. Erginbilgiç has raised the bar again, targeting free cash flow of £5bn-£5.3bn by 2028, and a return on capital of 23%-26%. Itâs starting to look indispensable for UK investors with a long-term horizon but with a P/E nudging a staggering 65, any bad news will be punished.
Well done Rolls-Royce, and well done Howden too. But for my next big FTSE 100 growth play, Iâll look elsewhere. I think there are better opportunities out there now.
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Harvey Jones has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Howden Joinery Group 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.
