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So far in 2024, the FTSE 100 has risen 6%. Within the index, some stocks have obviously performed better or worse than this benchmark index. Looking ahead to 2025, I think the index will probably gain between 6% and 10%. Using that assumption, here are two FTSE 100 stocks that investors should consider that could provide higher returns.
Continuous financial beats
The first company is Next (LSE:NXT). Over the past year, the retailer has enjoyed a 22% rise in share price, well above the performance of the FTSE 100.
One factor that has helped drive the stock higher has been strong financial performance. On several occasions this year, the company has raised its outlook and expectations for future revenue due to demand. For example, in late October a trading update showed that full-price sales in the third quarter were up 7.6% from last year. This was 2.6% above guidance for the quarter of a 5% increase. As a result, the company raised guidance for fourth-quarter sales.
What's encouraging for investors is that business growth is coming from all divisions. This bodes well for 2025, as even if one area starts to slow down, other parts of the group can help pick up the slack. Interestingly, a notable area of growth recently has been overseas sales.
Some will point to the price-to-earnings ratio as a potential risk. At 14.96, it's admittedly above my fair value benchmark of 10. However, I wouldn't call the stock overvalued. The average index for the FTSE 100 is 15.5, so there could still be room for the share price to rise next year before it starts flashing red.
However, one risk is that Next is sensitive to the financial status of the buyer on the street. If inflation rises next year or interest rates don't fall as much, people could feel the pressure and cut spending on Next.
Global growth fuels optimism
Another company to consider is experian (LSE: EXP). The stock is up 13% over the past year, as the growing company continues to make progress in North America and Latin America.
Last month, first half results showed revenue growth of 7% compared to the same period last year. Guidance for 2025 is set for revenue growth of 6% to 8%. If this can be achieved, then the share price could continue to rise next year, reflecting the improved financial results achieved.
Pure numbers aside, the stock could also benefit from continued product improvements. It is driving artificial intelligence (ai), allowing the data analytics platform to have additional features that existing customers can use. This should help customers stick with Experian because of the added benefits.
One concern investors might have is the rapid push for acquisitions. I can count six different acquisitions or mergers that were seen in the first half presentation. This is a lot to deal with at once and could act as a distraction for management.
However, I think both stocks have the potential to outperform the FTSE 100 index next year based on this year's growth. Both could be worth considering for investors.
