In recent months, the stock market has been quite volatile, and some UK shares have experienced significant downward momentum. But sometimes, investors get it wrong. And while it can be horrible to watch, these situations are a breeding ground for buying opportunities.

Let’s explore two businesses that have taken major hits recently and whether now is the time to buy.

A hammered gaming studio

Shares of the UK game development and publishing group Frontier Developments (LSE:FDEV) were pulverised not too long ago. So much so that over the last 12 months, the stock is down nearly 50%. What happened?

A trading update issued in November last year was largely to blame. Following the release of the latest addition to its Jurassic World: Evolution franchise, management reported lower than expected initial post-release sales on the PC platform. At the same time, the highly anticipated Odyssey expansion to its Elite Dangerous IP has also struggled due to mediocre reviews.

Consequently, revenue guidance for its full-year results was cut, and investors had a bit of a meltdown. But was this reaction justified? I don’t think so. Frontier has a reputation for improving and adding new content to its games long after their initial release. As such, the studio has already begun addressing the concerns of gamers regarding Odyssey. Meanwhile, Jurassic World: Evolution 2 was met with critical acclaim, and Console sales are aligned with expectations making up for the disappointing PC sales.

So, is this a buying opportunity for my portfolio? I certainly think so. These issues, while concerning, appear to be short term. And with a vast line-up of new titles being released in the coming years, including Formula 1 and Warhammer, I think shares of this UK stock could be set to thrive over the long term.

UK robotics stock

2021 was a tough year for Ocado (LSE:OCDO). Despite delivering a stellar performance in 2020, shares of the UK fulfilment-automation robotics company were slashed by 36% over the last 12 months.

There are numerous catalysts behind this lacklustre performance. But it seems to have started in late 2020, when rival firm, AutoStore sued the company for patent infringement. Then later in the year, a fire broke out at Ocado’s Erith CFC facility. The disruptions caused 300,000 orders to be cancelled.

With roughly £35m of revenue lost and an ongoing legal battle, uncertainty started to brew, leading to the disappointing performance last year. But is now the time to buy?

The fire, while frustrating, is ultimately a short-term problem. Minimal damage was done to the facility, which has since been brought back to full operating capacity. Meanwhile, the lawsuit against Ocado ended in December after the judge ruled in favour of the company, dismissing all 33 claims made by AutoStore.

With the veil of uncertainty seemingly lifted, Ocado looks primed to return to full-growth mode. Having said that, the company still has plenty of competition, including AutoStore, to overcome in its expansion into the US and other European nations. Attracting and retaining clients could prove tricky if its automation technology fails to deliver higher efficiency than alternatives.

But personally, I think it’s a risk worth taking. And with the stock seemingly trading at a large discount, Ocado could be a potentially lucrative opportunity for my portfolio.

Zaven Boyrazian owns Frontier Developments. The Motley Fool UK has recommended Frontier Developments and Ocado Group. 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.

Despite popular belief, a stock market crash is not a common event. There have only been three in the last 22 years, including the one seen in March 2020 triggered by the pandemic. 

However, while the adverse business impacts of the pandemic are slowly coming to an end, fears of another stock market crash are starting to brew. Let’s take a closer look at what’s going on. And what I intend to do should the worst come to pass.

A catalyst for another stock market crash

Recently, several high-growth stocks have seen quite a bit of pullback. There are undoubtedly numerous catalysts behind this, but fears surrounding inflation seems to be at the top of investors’ minds.

The direct result of inflation is pretty apparent, prices go up, increasing the cost of living, making consumers’ lives miserable. However, businesses can often pass on the higher costs, protecting profit margins. So, why is the stock market reacting so negatively?

A small amount of inflation can stimulate economic growth. That’s why the Bank of England has an annual target of 2%. But too much, and it creates a crisis. So, to counter today’s inflation situation, central banks like the BoE are raising interest rates. And this is what seems to be creating fears of another stock market crash.

As interest rates go up, so does the cost of debt. And for businesses that were drastically impacted by the pandemic, this could be a nightmare.

After all, many started borrowing money to stay afloat last year. But higher interest payments could add a lot more pressure to cash flows. Suppose a large number of companies start defaulting on loan payments. In that case, bondholders and loan issuers alike will begin losing considerable capital. This, in turn, reduces market liquidity. Consequently, less money can be used to fund new ventures, leading to an economic slowdown that could mutate into a stock market crash.

Time to panic?

As horrifying as this sound, it’s very much a worst-case scenario, and a stock market crash is by no means guaranteed. Personally, I think a slowdown is likely given the current economic situation. But I would be surprised if it triggers the full global crisis that many investors seem to fear.

But let’s assume it does happen. Is it time to panic? No. It could be quite the opposite. Why? Because stock market crashes often present some of the best buying opportunities any investor could ask for. 

Unless a company is riddled with debt and cannot withstand the pressure of rising interest rates, chances are it’s not going to be affected by the actions of central banks. Yet despite knowing this, panicking investors can often send shares of strong businesses crashing anyway. But if there’s nothing fundamentally wrong, and the firm’s growth strategy isn’t compromised, then the share price will eventually recover and may continue climbing even higher over the long term.

Sure, it will be horrible to watch my portfolio suffer large declines. But by increasing my positions in strong businesses that aren’t permanently undermined by the cause of the crash, I could be significantly better off over the long term. That’s why I’ll be looking out for bargains to take advantage of, rather than worrying about any short-term declines if the doomsayers turn out to be right.

The Motley Fool UK has no position in any of the shares mentioned. 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.

The situation in the UK five years ago was very different to today. Wearing face masks would have got me a strange look on public transport for a start! Back in early 2017, the UK was still getting to grips with the 2016 Brexit vote and what it might mean going forward. We were also getting ready for a general election, that took place in June 2017. Aside from politics and social events, what about my investments? Would a straightforward FTSE 100 tracker have yielded good results over the past five years?

Small capital gains

Exactly five years ago, the FTSE 100 index closed at 7,338 points. The market is currently at 7,481 points, meaning that I’d be sitting on a profit from this period. It works out at just under 2%. So over five years, this translates to an annual return of 0.4%. 

There are several observations that I can make about this. Firstly, yes I’d have made a profit. Admittedly, it’s not as much as I might have hoped for. Yet I do need to appreciate that this is the gain purely from share price appreciation. It doesn’t take into account dividend payments, which I’ll come to shortly.

So is 2% over five years a good return? One way to assess this is to look at the volatility of the FTSE 100 tracker. For example, during this period, the lows were around 5,000 points back in March 2020. This is a steep fall, meaning that at this point my unrealised loss would have been 32%.

On the other side, the highs of 7,877 points in 2018 would have put me in profit by just over 7%. So the risk versus return looking back over this period doesn’t quite stack up in my opinion.

Don’t forget the dividends!

One major point that many forget when looking back is to take into account the dividend payments. I might have only made 2% from the FTSE 100 tracker’s share price, but I’d have received good dividends during this period. The average dividend yield of the index over the period was 3.91%. This adds up to give me a return from dividends of 19.56%.

When I add this to my total profit figure, it looks a lot more healthy. This serves to remind me of an important point when investing for the long run. This is that dividend shares can be a great source of income even if the share price doesn’t move much.

That’s one reason why the high dividend yields currently on offer from some individual stocks in the FTSE 100 are attractive to me. A FTSE 100 tracker will give me an average dividend yield. If I think that I can outperform the index, then I can select a smaller group of stocks. This way, I can target a higher yield.

Stock-picking within the FTSE 100

I’d have generated a profit from a FTSE 100 tracker over the past five years, but maybe not as much as I might think. If I targeted high growth stocks back in 2017, I might have found myself sitting on larger unrealised gains now. Clearly, beating the index isn’t an easy task by any means. But being active in my stock picks (be it for income or growth) can help me to perform well in the long term.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. 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.

I, like many investors, crave undervalued stocks. Not only do they have untapped potential, but often they’re incredibly affordable. Here are two companies I think fit that criteria and that I intend to hold for a decade to maximise returns.

A light at the end of the tunnel

If reports that Omicron really does cause milder symptoms are true, then I think we could actually be seeing the light at the end of the tunnel. And if that is the case, then the first thing I’ll be doing is booking a holiday.

I’ve already outlined my hesitancy about investing in airlines in 2021. I thought that many investors were overly optimistic about a return to normal and have been burned by lockdown after lockdown. But now the easyJet (LSE: EZJ) share price is 621p, 32% lower than this summer’s high of 921p. Its price-to-earnings ratio (P/E) sits at 12.8, only a little higher than the last 13 years median of 12.69. If the pandemic continues to wind down in severity, then I think we could see a much larger boom in value as we approach the summer.

But there’s no sugar-coating the fact that easyJet has suffered a lot over the pandemic. It will need to find inventive ways to maximise revenue in the coming years. But, against the odds, it survived and has managed to minimise losses at every turn. Cash burn was inevitable, but easyJet was able to keep it to £36m per week, a full £4m below the expected £40m. This resilience in the face of disaster has really impressed me and I can’t wait to see what the company does in better times.

A cheap but valuable digital service

Wise (LSE: WISE) makes it simple and inexpensive to move money across currencies and bank accounts. This UK IT firm went public in early 2021 and its stock price soared to 1,150p in September before plummeting to 678p at the time of writing. This is pretty normal for a company following an IPO since it takes time for the market to identify a share’s actual worth. Right now, the stock’s P/E ratio sits at a very low 5.16, meaning the price of the shares are closely aligned with the company’s earnings.

If I had any doubts about the health of the company, I need only look at customer and revenue growth over 2021. Revenue nearly quadrupled while Wise provided services to 10 million customers, up four million from 2020.

One thing I’m concerned about though is the company’s small profit margins. Earnings have fallen as the company has looked to expand into new markets. The smaller margins of course put Wise on shakier ground. If there’s a big black swan event in the global economy it could send it off balance. But, having said that, the pandemic was the ultimate black swan event and Wise has not only survived, but thrived. As life returns to normal, I think Wise, like easyJet, has the potential to benefit massively from pent-up travel demand.

Truly undervalued shares are hard to find, but I think these companies have both shown extraordinary resilience in the face of disaster. Now that their shares have fallen in price, I believe they will make excellent additions to my long-term portfolio.

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Warren Buffett tells us that the best protection against inflation is your own earning power, and the second best is a wonderful business. Here are three reasons why I think there might be a wonderful business underneath Rightmove (LSE: RMV) stock.

1. An economic moat

Rightmove is the UK’s largest online property platform and its size gives it what Buffett calls an economic moat. Specifically, Rightmove’s size means it benefits from a network effect.

A network effect happens when the value of a product or service increases as more people use it. In the case of Rightmove, having more buyers makes it a more attractive place for sellers to advertise and having more sellers makes it a more attractive place for buyers to search. This creates a barrier to entry for smaller competitors trying to take Rightmove’s market share.  

2. Low CAPEX

See’s Candies is one of Buffett’s favourite businesses because it produces lots of without needing much money to run. Whilst it’s great if a business produces a lot of cash, it’s less good if that cash needs to be reinvested to keep the business going. Rightmove’s free cash flow statement reveals that the money needed to maintain, grow, and upgrade its assets — the company’s capital expenditure (CAPEX) — is exceptionally low. Over the last 12 months, Rightmove generated just over £150 million in operating cash flow and spent just under £2 million in CAPEX. More generally, Rightmove’s CAPEX over the last five years has accounted for just 1.3% of the cash generated by its operations, leaving the rest available for growth, debt repayment, and shareholder returns.

3. Attractive shareholder returns

Rightmove’s management has used that free cash to reward shareholders. One of the reasons that Buffett loves Bank of America is the company’s use of buybacks, allowing shareholders to own a greater portion of the company without paying out for further investment. Rightmove’s modest debt has allowed management to steadily repurchase around 20% of its shares over the last decade. As a result, a 225% gain in net income generated by the business has translated to a 288% gain in earnings per share. During this time, Rightmove has also paid a regular and growing dividend to its shareholders, which currently yields around 1%.

Risks

Rightmove has a lot of the qualities of a wonderful business. But even a wonderful business carries risk from an investment perspective. The major risk to Rightmove stock that I can see comes from rising interest rates. This creates risk in two ways. First, rising interest rates make mortgages more expensive, which could slow the UK property market and inhibit the earnings of the underlying company. Second, rising interest rates increase the returns from savings and bonds, which might generate downward pressure on the stock, given that it currently trades at around 25 times sales and around 45 times earnings.

Overall, I think Rightmove has a lot of the characteristics that Warren Buffett looks for in a wonderful business. But one of the things that the Oracle of Omaha says about Kraft Heinz is that you can pay too much for a wonderful business. Since I think Rightmove stock is overpriced right now, especially with interest rates rising, I’ll be keeping it on my watchlist and waiting for a fair price.

Stephen Wright has no position no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. 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.

When looking for the best shares to buy now, I think a good place to start is spotting trends within the stock market in general. Today, one of the most obvious is the changing consumer and business landscape created by the pandemic. The virus has decimated operations for many enterprises and even led several prominent firms to the brink of bankruptcy. But for others, it’s created some exciting opportunities.

I’ve spotted two UK shares that could be set to thrive in the coming years, thanks to tailwinds coming off of the pandemic. Let’s explore.

An e-commerce-linked stock I’d buy now

The accelerated adoption of e-commerce triggered by Covid-19 is hardly a new discovery. Consumer shopping habits have drastically shifted throughout the pandemic so far, and now online sales represent just over a third of all retail spending in the UK.

While there are plenty of stocks within this space, I’m personally drawn to Warehouse REIT (LSE:WHR). The company invests in logistics and fulfilment facilities and rents them out to other businesses like online retailers. It’s far from the fanciest investment opportunity out there. But with well-positioned warehouse space running out, its pricing power, and in turn, profits are on the rise.

It’s not without its risks, of course. The e-commerce fulfilment industry is highly competitive. And the group may find itself in numerous bidding wars to acquire new properties and clients. But with an existing tenant list that includes big brands such as Amazon, and Screwfix, I think Warehouse REIT can overcome its rivals, making it potentially one of the best shares to buy now.

The rise of health awareness

I think it’s fair to say that the pandemic has made many individuals more health-conscious. And that’s what brought Treatt (LSE:TET) onto my radar.

Treatt is a chemicals company that produces flavours and fragrances used in beverages and consumer healthcare and beauty products. On the beverages side of the equation, the firm works directly with soft drink companies to replicate or design new natural sugar-free flavours.

As a result, its clients can peddle healthier versions of the same soft drinks to more health-conscious consumers. The company is at the mercy of fluctuating raw material prices used to design these bespoke flavours. While this could apply pressure to profit margins, I believe Treatt can pass on the cost to its clients. And that’s something I like to see when searching for the best shares to buy now.

The bottom line

The pandemic may not end in 2022. But as the world adapts, I believe these two firms can take advantage of the changing landscape. Time will tell whether I’m right, but I think these are some of the best shares to buy for my portfolio today.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Treatt and Warehouse REIT. 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.

I think these could be two of the best UK shares to buy for my portfolio and hold at least until the end of the decade. Here’s why.

A top electric vehicle stock

The electric vehicle (EV) revolution offers UK share investors like me many money-making possibilities. The International Agency predicts there will be 145m electric cars on the world’s roads by 2030. That’s up significantly from the 11m in 2020. It says the number could even reach 230m, if governments get serious on meeting their emissions targets.

I myself have invested in car parts manufacturer TI Fluid Systems and I’m considering buying Trifast (LSE: TRI) too. This particular company makes screws, bolts and other fastenings that can be found in consumer electronics, solar panels, white goods and a broad host of other products. But Trifast’s single-biggest money spinner is in the manufacture of parts for light and heavy vehicles. Collectively these account for 35% of group revenues.

Trifast makes bespoke products for autos and so it’s built strong relationships with carmakers all over the globe. This is especially critical as OEMs select trusted suppliers to help them overcome the challenges that these new technologies create. I think Trifast’s in great shape to exploit the EV boom too because low-emission vehicles require more fastenings than conventional petrol-powered vehicles.

My main concern from an investment standpoint is that this UK share doesn’t come cheap. At current prices it trades on a forward P/E ratio of 26.8 times. This is the sort of high valuation that could prompt a sharp share price reversal if trading conditions worsen. For example, if broader supply chain problems in the auto industry hit demand for its fastenings and revenues subsequently fall.

Another fast-growing frontier

Still, from a long-term perspective I think Trifast has a lot to offer. It’s a view I take with regards to gaming software designer Frontier Developments (LSE: FDEV) as well. I expect earnings here to rise strongly as video games sales soar. Analysts at GlobalData think the global games industry will be worth $452bn by 2030. That’s double what the market was estimated to be worth last year.

Frontier Developments has a plethora of popular titles in its stable. Games within the Jurassic World  Evolution franchise and Planet Coaster and Planet Zoo canon sell in huge numbers and it has some massive titles coming down the pipe soon. These include games under the hugely-popular Warhammer wargaming banner and a new F1 motor racing motor management game.

It’s worth bearing in mind that the video games market is highly competitive and strong sales are never guaranteed. Indeed, a crowded release window at the end of 2021 prompted weaker-than-expected sales of Jurassic World Evolution 2 and a subsequent scaling down of full-year revenues forecasts. That said, I still think the company’s long track record of success makes it an attractive buy for the video games boom. It’s one of a selection of white-hot UK growth shares I have my eye on.

Royston Wild owns TI Fluid Systems. The Motley Fool UK has recommended Frontier Developments. 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.

High-growth Nasdaq stocks are getting crushed right now. Electric vehicle manufacturer Rivian is a prime  example. Yesterday, its share price ended the day at $81 after starting the year at $104. 

So, what’s behind this sell-off? And is it time for me to start buying some beaten-down Nasdaq growth stocks for my portfolio?

Why are Nasdaq stocks falling?

The latest bout of volatility across the Nasdaq is predominantly down to bond yields, which have surged higher this year. Yesterday, the 10-year US Treasury yield climbed up to around 1.8%, roughly 20% higher than the yield at the start of the year.

The reason this has impacted growth stocks is that analysts typically value stocks by discounting their future earnings and cash flows back to a ‘present value’ using an appropriate interest rate. If interest rates are higher, future earnings and cash flows are discounted back to the present value at a higher rate, which gives a lower value. This ultimately impacts the projected value of the stock. Those with no earnings in the foreseeable future (such as Rivian) tend to be hit the hardest because their future earnings are discounted back heavily.

I’ll point out that I’m not particularly surprised by this sell-off across the Nasdaq. One of my top predictions for 2022 was that expensive high-growth stocks such as Rivian could struggle this year as valuation becomes more of a focus for investors. It’s obviously still early days, but so far, that prediction is looking pretty good.

Is it time to buy Nasdaq stocks?

As for whether it’s time for me to buy some high-growth Nasdaq stocks for my portfolio, here’s how I see it.

I expect bond yields to go higher this year. I think the 10-year US Treasury yield could easily hit 2% as the US Federal Reserve hikes interest rates. So, I expect to see further volatility across the Nasdaq. That said, I think it’s a good time to start buying some high-quality Nasdaq names for my portfolio. Because right now, many stocks are beginning to look attractive from a valuation perspective, to my mind.

It’s worth noting here that Nasdaq stocks can generally be divided into two categories. There are those that are generating strong levels of earnings and cash flows now, such as Microsoft, Adobe, and Nvidia. Then, there are those that are not expected to generate earnings for many years such as Rivian, Peloton, and DraftKings. I’ll be looking to invest in the former category – those that have earnings and cash flows now. The reason for this is that I expect the share prices of these companies to be impacted less by rising bond yields.

Attractive valuations 

One stock, in particular, that I think looks interesting right now is Microsoft. This is one of my favourite companies due to the fact it operates in a number of high-growth industries. After a recent share price pullback, its valuation is looking quite attractive, in my view.

Another is Adobe, which has pulled back from around $700 to near $500 recently and now trades on a P/E ratio of less than 40. I think that’s quite reasonable given Adobe’s dominance in the content creation software market.

Of course, these stocks could fall if bond yields continue to rise. However, I expect them to do well in the long run, as the world becomes more digital.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns Microsoft and Nvidia. The Motley Fool UK has recommended Microsoft and Peloton Interactive. 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.

Over the past 12 months, the Argo Blockchain (LSE: ARB) share price has been on a roller coaster ride. Since the beginning of 2021, the stock has fallen from 95p to around 84p. However, it peaked at 284p in the middle of February last year. Since then, investors have been steadily moving away from the enterprise. 

It is difficult to understand why. As the share price has been falling, the company’s fundamentals have been improving. For the 2020 financial year, the cryptocurrency miner reported total revenues of £19m. This figure is expected to hit £82m in 2021 and £119m in 2022. And earnings per share are set to rise from 0.4p for 2021 to 10.8p for 2021 and 12.6p for 2022. 

Argo Blockchain share price value

Based on these projections, the stock is currently dealing at a forward price-to-earnings (P/E) multiple of 7.5. This seems incredibly cheap compared to both the company’s growth and its international peers. 

This ratio suggests the shares are trading at a PEG ratio of less than 0.5. Anything below one indicates the shares offer growth at a reasonable price. 

At the same time, US-listed cryptocurrency trading companies are selling at earnings multiples of 40, or more. 

Using these valuation metrics alone, I think there is a robust case to be made that the Argo Blockchain share price can double in value. I could go so far as to say that if the company’s primary listing was in the US, the stock could be worth many multiples of its current share price. The organisation already has a US listing of American depositary shares (ADS) listed on the Nasdaq. 

So the company looks undervalued, its profits a growing, and it appears to have a bright future. With this being the case, I have to wonder why the stock has been falling. 

It seems as if the market is worried about Argo’s growth plans. The corporation has been criticised for overpaying for land in Texas, which is required to build its new cryptocurrency mining facility.

It has also been criticised for issuing new shares to raise money for its expansion initiatives. As new shares are issued, existing shareholders are diluted. Issuing new shares can also significantly impact the earnings per share figure, as there are more shareholders to fight over each dollar of profit. 

The bottom line 

I think these twin headwinds are worth considering. If the company is overpaying for growth assets and asking shareholders to foot the bill, management could face pressure from investors. 

The critical test will be whether or not the company can continue to grow. All indications suggest it can. So I would be happy to buy the stock for my portfolio as a speculative investment.

Considering the Argo Blockchain share price valuation and its growth potential over the next couple of years, I think this investment could be an attractive addition to my portfolio. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Recently, I have been looking for cheap FTSE 100 growth shares to buy for my portfolio. I have been looking out for stocks that are not necessarily the most attractive growth investments.

Instead, I have been focusing on shares I believe fly under the radar for the rest of the market, as these companies may have more potential. Here are three FTSE 100 growth stocks that I would buy today, based on their potential. 

FTSE 100 distribution champion

The first company is the distribution and support sales group DCC (LSE: DCC). Over the past couple of years, this corporation has expanded via a combination of growth and acquisitions. Earnings per share have increased at a compound annual rate of 11% since 2016. 

However, as this is not an exciting tech business, the market seems to be overlooking its potential. The stock is trading at a relatively attractive forward price-to-earnings (P/E) multiple of just 13.6. I think that undervalues the FTSE 100’s growth outlook for the next few years. 

As we advance, some challenges it could face include competition and higher interest rates. Rising rates could make the company’s debt more expensive and reduce profit margins. 

Growth and income

Another FTSE 100 growth stock I would acquire for my portfolio today is ITV (LSE: ITV). This is a company the market loves to hate. Even though the corporation has told investors it expects to report a record sales performance for the second half of 2021, the stock is still trading at the same level it was this time last year. 

I believe this presents an opportunity. At the time of writing, shares in the broadcaster are selling at a forward P/E of 7.7. There is also the potential for income as ITV has promised to restore its dividend this year. Analysts have pencilled in a potential yield of 3.1%. 

Of course, there are a couple of reasons to be sceptical about the group’s growth outlook. It is having to fight off competition from sizeable American streaming groups, which have deeper pockets. These could hit ITV’s advertising revenue, although it is also generating income from these companies at its production arm. 

Favourable environment

Inflation is rising around the world and trying to determine how rising prices will affect individual companies is challenging. However, research shows that consumers seek cheaper products during periods of rising prices.

This suggests the outlook for B&M European Value Retail (LSE: BME) is improving. The FTSE 100 enterprise is looking to capitalise on rising consumer demand for its services by increasing the store count. This strategy has produced results in the past, and I see no reason why the company cannot follow the same playbook as we advance. 

That said, B&M’s growth is far from guaranteed. The retail sector is incredibly competitive. The company could become entangled in a price war with one of its peers. This could have a significant impact on its expansion plans. 

Despite this risk, I am confident consumers will continue to flock to B&M’s offer, suggesting it is one of the best stocks in the FTSE 100 to own in order to ride the inflationary trend.

Rupert Hargreaves owns ITV. The Motley Fool UK has recommended B&M European Value and ITV. 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.