I like buying quality stocks when they are down. One of them is the relatively cheap FTSE 100 growth stock CRH (LSE: CRH). The Irish company, which provides products and services for construction, has seen its stock price decline by some 7% over the past year.
The number might not look particularly bad at any other time, but over the last year stock markets have risen a fair bit, which makes it stand out. Moreover, the stock was up some 5% yesterday, after the company released its latest trading update. If this had not happened, the fall would have looked a lot bigger.
CRH posts positive trading update
But things are clearly looking up for it. For the first quarter of 2021, the company said that sales and profits were “ahead”. It did offer some more details for sales numbers, though not for profits. Its reported sales rose by 15% from last year. It expects the numbers to stay ahead for the first half of the year as well.
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This sounds pretty impressive to me considering that its sales showed an appreciable rise in the past year. It has not said anything about net profits, but if they rise too, that would be even better considering that they were at their highest in three years during 2021.
A cheap FTSE 100 growth stock
From the looks of it, this might just happen. Analysts have pencilled in an increase in earnings per share for 2022. This also means the CRH share price could rise further. The company’s price-to-earnings (P/E) ratio based on its 2021 earnings, is already at less than 10x, making it a cheap FTSE 100 growth stock. Its forward P/E is even lower at around 9x, which suggests that the stock might just be a good buy for me.
This is especially so when compared to its FTSE 100 peer Ashtead, which has a P/E of around 22x right now. Also, the FTSE 100 average P/E is at around 15x. So whichever way I look at it, the stock looks cheap in terms of valuations.
It is a stock to buy for the long term though. Over the last 10 years, it has more than doubled investors’ money. But in 2022 it has fallen quite a bit, making its five-year gains appear quite underwhelming. I would keep this in mind, because as a cyclical stock, there is always a chance that it can dip a lot, and fast. It has not recovered since the February dip in the stock markets, for instance. And considering that the IMF has just lowered global growth forecasts, it could definitely see a slowing down in the near future.
What I’d do
On the whole, though, I like CRH enough to have bought it some time ago and I am holding for the long term. After its trading update, I am also planning to invest another £1,000 in it.
