The FTSE 100 may be breaking new highs but one popular growth stock has defied the trend by slumping to a 52-week low. That may tempt investors who prefer to buy out-of-favour bargains than chase momentum stocks upwards.

Primark owner Associated British Foods (LSE: ABF) has fallen out of fashion with investors. Its shares are down almost 15% over the last year and 30% over five years. So is this now a brilliant bargain or an unsightly value trap?

The gloom deepened with ABF’s latest trading update on 23 January. Warmer autumn weather and cautious consumers dented Primark’s UK revenues in the 16 weeks to January 4.

ABF’s short on style

Sales in the UK and Ireland fell 4% during the period, or 6.4% on a like-for-like basis. That’s a blow because they make up 45% of Primark’s total. The group’s expanding in a string of other markets though, including Spain, Portugal, France, Italy and the US. In total, it operates across 56 countries.

Yet the board still cut fiscal 2025 sales growth targets to low-single digits. On the plus side, gross margins widened, while stringent cost management offset inflation.

Unfortunately, inflation isn’t going anywhere. The Bank of England (BoE) predicts it will hit 3.7% this summer. Even value retailers can’t escape the squeeze. Nor can ABF’s food businesses, hit by rising costs.

There’s a glimmer of hope though, with ABF shares edging up 3.5% over the past week. The BoE’s rate cut on 6 February lifted investor sentiment, as lower interest rates could support consumer spending. But one week’s movement isn’t a trend. It’s barely even a blip.

Associated British Foods’ balance sheet remains strong. Net debt (including lease liabilities of £2bn is partly offset by £1bn of net cash. An 18.1% return on capital employed is solid. The group made a £1.9bn profit last year.

As said, Primark continues expanding internationally, with US growth looking promising. However, trade tariffs could be a concern if Donald Trump targets the UK.

The 16 analysts offering one-year share price forecasts for ABF have a median target of just over 2,252p. If correct, that’s an 18% rise from today. We’ll see. Forecasts range dramatically, from 1,730p to 3,120p. The recovery isn’t guaranteed.

Of 19 analysts covering the stock, 10 rate it a Hold, while the rest are split between Buy and Sell.

It’s a value play with risks

ABF looks like superb value today. Its price-to-earnings (P/E) ratio has plunged to just 9.7. That’s cheap for a solid business like this one, well below the FTSE 100 average P/E of around 15 times.

If consumer confidence rebounds and Primark expands, investors who take a chance on the stock could reap the rewards. However, there’s a chance conditions worsen or margins stay under pressure. If so, investors will just have to wait until the cycle swings back in its favour.

I like recovery stocks, but experience has taught me turnarounds can be slow.

The government’s upcoming Budget hike to employers’ National Insurance contributions won’t help. Nor will the 6.7% rise in the UK Minimum Wage. Worse, the lowly 2.2% trailing yield won’t reward investors while they wait.

I think investors should be cautious before considering this one today.

BP‘s (LSE:BP) been in the news a lot over the past few days. In response to the changes going on at the business, Wall Street brokers and analysts have been busy revising their forecasts where they see the BP share price moving over the next year.

When I consider that the current price is 456p, some of the revisions make for very interesting reading!

A busy week, so far

Before we get to the numbers, let’s briefly recap what’s been going on. Activist hedge fund Elliott Investment Management revealed a significant stake in the oil stock on Monday (10 February), causing this share price to jump 7%.

On Tuesday, BP released annual results for 2024. This included a sharp drop in profits to $8.9bn, from $14bn the previous year. As part of the release, CEO Murray Auchincloss announced plans to “fundamentally reset” BP’s strategy.

Changing strategy and restructuring the business is something Elliott will be pushing for. Based on historical investments made, it has a history of trying to shake up large companies to become more efficient and profitable.

Changing forecasts

Based on the above, analysts have been rushing to update their forecasts. Several large players have now raised their target price. Citibank has a target price of 515p. Goldman Sachs is at 530p, with Barclays the most optimistic at 650p.

On the other hand, JP Morgan is Neutral at 440p, with Morgan Stanley at 407p.

All of these projections centre on where the share price could be in a year’s time. They’re just subjective views and shouldn’t be taken as gospel. However, given that these are the views of the experts, investors can certainly pull some valuable information.

Share price boosters… or not

The key thing that struck me how differing views on recent events could impact the stock. Some of analysts clearly think the reshuffle and strategy change is overdue and is a welcome sign. Reading into some reasonings, there’s the suggestion that Elliott’s involvement could lead to board changes, portfolio rationalisation, and a focus on upstream projects to maximise free cash flow.

This should filter down to higher profits which, in turn, should boost the share price.

Yet there’s also the view that the stock could fall from the current price. Over the past year, it’s down a modest 3%. A further fall could be the result of any disagreements between BP and Elliott management teams. The stock could also be negatively impacted by further criticism from environmental groups with the company shifting towards more fossil fuel projects.

Getting a complete picture

If 650p does turn out to be correct, it would reflect a 42.5% jump from the current level. Certainly, some investors might want to consider this for their portfolio. But it’s important for each investor to do their own research rather than just relying on others.

Greggs‘ (LSE: GRG) shares took a sharp dive early this year after the baker published quarterly results that missed expectations.

Despite posting record revenue of £2bn for 2024 and like-for-like sales growth of 5.5%, shareholders were underwhelmed. Expectations were high, with eyes on growth of 6.3%. At only £125m, net cash also dipped for the year, down from £195m in 2023.

Famous for its sausage rolls and pies, investors have become accustomed to the high street chain posting exceptional results. The slowdown in growth prompted a severe reaction, sending the shares tumbling a massive 26%.

Speaking on the report, CEO Roisin Currie noted a broader slowdown in the UK economy: “Lower consumer confidence continues to impact high street footfall and expenditure,” she said.

However, it all seems like a bit of an overreaction. Earnings per share beat expectations in 2023 and in H1 2024 and are expected to reach £1.35 for the full year — a 6.6% rise.

One risk the company’s been battling with is a change in dietary trends. So can new menu items help Greggs’ share price recover – despite challenges to its expansion plans?

New menu

Greggs recently unveiled some surprising new menu items, including a BBQ Crispy Chicken Burger and Southern Fried Chicken Wrap. These additions mark a strategic move to compete with fast-food giants such as McDonald’s and KFC.

These items will initially be available in over 150 shops, with plans to expand to 300 by spring. There are further plans to reintroduce popular items like the Katsu Chicken Bake and various cinnamon-flavoured drinks.

The changes are all part of a plan to diversify beyond traditional offerings and attract a broader customer base.

Expansion troubles

Greggs is often cited as one of the UK’s biggest success stories, a small local baker that expanded to 2,600 stores nationally. But it seems not everybody relishes the pleasure of seeing Greggs’ familiar blue and yellow logo in their town.

Residents of Conwy in northern Wales are protesting the baker’s plans to open a store on their high street. The 700-year-old town fears the chain could threaten local business, as it plans to open only a few doors down from the long-standing Popty Conwy Bakery.

While pushbacks of this kind are rare for Greggs, it could be indicative of changing attitudes toward the baker. Its rapid growth and familiar branding are aligning it with the likes of Subway and Starbucks — corporate-type outfits which traditionalists shirk.

A promising value stock?

A key risk that Greggs now faces is rising costs brought about by the government’s new Budget. Increases to the Minimum Wage and National Insurance contributions are expected to hit the hospitality sector hard. When the Budget was announced last November, several brokers downgraded their targets for the baker and its competitors. 

Still, the average 12-month price target is £28.70 — a 36% increase from the current level. Looking ahead, earnings are expected to reach £1.77 per share by 2027, with revenue expected to reach £2.62bn.

The falling price means it’s now near a three-year low compared to earnings. In my book, that makes it an attractive stock to consider for value investors looking to grab some shares at a bargain.

It may also be what prompted HSBC to put in a Buy rating on the stock last month.

Palantir (NASDAQ: PLTR) is one of the hottest stocks in the market right now. In recent months, it seems to have replaced Nvidia as the artificial intelligence (AI) stock to own.

I’ve had this tech stock on my watchlist for a while now, but I’ve never actually bought it for my ISA. Is now the time to pull the trigger?

The real deal

Palantir’s recent results have been really impressive. In my view, they’ve shown that this software company’s the real deal when it comes to AI.

Take the company’s Q4 2024 results, for example. For the period, revenue was up 36% year on year to $828m. Meanwhile, US commercial revenue was up a huge 64% to $214m. Clearly, demand for the company’s AI solutions (which help organisations use their data to get an edge) is sky-high right now.

What has really struck me is the confident tone from management.

“Our business results continue to astound, demonstrating our deepening position at the centre of the AI revolution,” wrote CEO Alex Karp in the Q4 results. “We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades,” he said in the letter to shareholders.

I like this confidence and the bullish long-term outlook. Overall, this company looks really exciting to me. I genuinely think it could be one of the major beneficiaries of the AI revolution.

I’m struggling with the valuation

However, there are a couple of issues that concern me from an investment perspective right now.

One is the stock’s recent move higher. Over the last year, it’s risen about 350% (which makes Nvidia’s 85% gain look pedestrian). I’m always hesitant to buy a stock after that kind of move because a pullback is often on the horizon.

Another is the valuation. Currently, Palantir has a market-cap of $256bn. Yet this year it’s only forecast to achieve $3.7bn in sales. So the price-to-sales ratio’s 69, which is worryingly high (for reference Nvidia’s on about 17).

As for the price-to-earnings (P/E) ratio, that’s currently about 205. That’s also very high (for Nvidia, read 30).

Now I’m not afraid to invest in high-valuation companies. Currently, I own quite a few high-multiple growth stocks. But for me, Palantir’s multiples are too much of a stretch. I think buying here would be risky.

If revenue growth in the next few quarters was to come in below expectations for some reason (eg fewer new deals signed with government agencies or corporations), this stock could get crushed. It’s worth noting here that the average broker price target at present is $86 – about 24% below the current share price.

My move now

Given the high valuation, I’m going to leave Palantir on my watchlist for now. After a 350% gain over the last 12 months, I’m not going to chase the stock.

If we were to see a sizeable pullback however, I could be interested in taking a small position as a speculative long-term investment. As I said above, I think this company’s the real deal when it comes to AI.

Legal & General (LSE: LGEN) shares have been a popular investment over the last five years. One reason for this is that they pay big dividends.

But have the shares been a good investment overall across this period? Let’s crunch the numbers.

Share price weakness

On 12 February 2020, the shares closed the day at 313p. So let’s say that an investor bought £5k worth of stock at that price. Ignoring trading commissions, they would have picked up 1,597 shares.

Fast forward to today and Legal & General’s share price sits at 239p. That’s about 24% lower than the share price five years ago. So the investor’s initial £5,000 would now only be worth about £3,817.

Of course, we also need to factor in dividends here. I calculate buying the shares five years ago meant they would have received a total of 111.12p per share in dividends. Multiply that by 1,597 shares and we get roughly £1,775.

Add this to the capital figure of £3,850 and we get a total of £5,592 (I’m assuming the dividends weren’t reinvested). That equates to a total gain of 11.8% for the investor. On an annualised basis, that works out at about 2.3% a year.

Lousy returns

An 11.8% return over five years isn’t great. Especially when you consider the returns generated by some other stocks over the period (it’s been a strong bull market).

Take Alphabet (Google) shares, for example. Over the last five years, they’ve risen about 145% in US dollar terms. That equates to nearly 20% a year.

Apple shares have done even better. Over the last five years, they’ve risen about 185% in US dollar terms (they’ve also paid small dividends). That works out at about 23% a year.

Takeaways

To my mind, there are a few key takeaways here. One is that high-yield dividend stocks don’t always produce strong returns overall.

Just because a stock offers a juicy yield, it doesn’t mean it will be a good long-term investment. Often, better returns can be achieved with stocks that pay small dividends, or those that don’t pay any at all.

Another is that it’s crucial to diversify capital across many different stocks. If the investor had only owned Legal & General shares over that five-year period, they wouldn’t have seen wealth grow much.

However, if they owned Legal & General, Apple, Alphabet, and a bunch of other high-quality stocks, they could have potentially done really well and increased their wealth significantly.

Worth considering today?

Are Legal & General shares worth considering for a portfolio today? Well they could be, especially for those seeking income from their investments.

For the 2025 financial year, the company’s forecast to pay out 21.8p per share in dividends. That translates to a yield of about 9.1%.

However, dividends are never guaranteed. There are also no guarantees the shares will be a good investment overall (volatility in the financial markets could impact the company’s profits).

Personally, I’m a bit spooked by the recent performance track record of the shares. For those looking to maximise returns, I think there are better shares to consider buying.

The share price of Barratt Redrow (LSE: BTRW) has surged nearly 10% in early trading this morning (12 February) after an upbeat set of half-year results. 

The FTSE 100 housebuilder raised full-year earnings guidance to the upper end of expectations and reported a 23% rise in interim pre-tax profit to £117.2m. It also thrilled investors with a £100m share buyback. Is it now a buy?

It’s been a tough few years for UK housebuilders. Economic uncertainty and sticky interest rates have squeezed buyer demand, while affordability concerns aren’t going away. 

Can this underperformer fight back?

Mortgage rates have edging up lately, which wasn’t expected. Although there are signs they’re sliding after the Bank of England cut base rates to 4.5% on 6 February. 

Today’s update suggests brighter times ahead. CEO David Thomas said the stabilising economic, political and lending environment has revived customer demand. Reservation activity has been strong since January, signalling renewed confidence.

Thomas said the “significant shortage of homes in the UK” should support prices and demand, despite the uncertain economic outlook.

Barratt’s integration of Redrow is progressing well, apparently. with the combined entity expecting to deliver around 22,000 homes annually in the medium term. The group’s operating margins are forecast to recover to 15%, while it’s targeting a 20% return on capital employed.

Forward sales are still falling though. They stood at 10,903 homes on 2 February, down from 11,460 a year ago. Despite that, the total forward sales value has jumped from £3.13bn in 2024 to £3.35bn. Prices remain resilient, even if they aren’t bombing along as they used to be.

The Barratt Redrow share price is still down 10% over 12 months and a staggering 47% over five years. Inflation and the cost-of-living crisis did much of the damage.

Despite that poor showing, they’re not exactly cheap, with a price-to-earnings (P/E) ratio of just over 15, in line with the FTSE 100 average. The trailing dividend yield is a modest 3.4%.

A so-so valuation and dividend yield

While today’s rally is encouraging, buying the shares now could be risky as profit takers emerge. In fact, the price is retreating as I write this (up just over 6% a little before 10am).

Long-term investors will see an opportunity if they believe the housing market will continue to recover. The UK still has a chronic housing shortage and that’s not going to change. The population keeps growing, while Labour’s housebuilding plans seem challenging, given the shortage of skilled workers.

Much depends on the Bank of England. A more aggressive interest-rate-cutting cycle would speed things up, but that’s not guaranteed. While the UK economy may need lower borrowing costs, the booming US may not.

Barratt has delivered an impressive update, and the market has responded positively. But with economic uncertainty lingering and affordability a challenge, much of today’s good news looks to be reflected in the share price.

For investors willing to take a long-term view, Barratt’s strong fundamentals could make it a compelling buy to consider. But they might want to curb their enthusiasm. We’ve got a long way to go.

The Diageo (LSE: DGE) share price just keeps falling. When I bought the FTSE 100 spirits giant in January last year, shortly after its November 2023 profit warning, I thought I’d bagged it at a bargain price. Yet this was only the start of its woes.

Diageo shares have slumped 25% over the last 12 months to 2,168p. They’re now trading at one-, three- and five-year lows. Investors watching this relentless decline might wonder, how much worse can it get?

This should be one of the most solid UK stocks of them all. A global beast with a vast range of renowned brands including Guinness, Johnnie Walker, Don Julio, Bailey’s, Tanqueray and Smirnoff.

Can this FTSE 100 stock recover?

Yet it’s been battered by the global downturn, shifting consumer habits, foreign exchange rates and now Donald Trump’s trade tariffs. Bargain seekers have repeatedly come unstuck, just as I did.

The latest blow landed on 4 February when Diageo withdrew its medium-term guidance. The board blamed Trump’s mooted 25% tariffs on Mexican and Canadian imports, which threaten its tequila and Canadian whisky brands. Sceptics saw that as a handy excuse.

Diageo’s interim results revealed the damage, with net first-half sales down 0.6% to $10.9bn.  Operating profit slumped 4.9% to $3.16bn. Adverse foreign exchange movements didn’t help. Nor did a 132-basis point decline in margins to 30.3%.

CEO Debra Crew talked up market share gains and North American momentum, particularly in Don Julio and Crown Royal. It didn’t help. Down the shares went.

Tariffs won’t help but Diageo’s stretch go beyond Trump. Younger consumers, particularly Gen Z, are prioritising wellness over spirits. The risks inherent in the group’s shift into premium products have been punished by the cost-of-living crisis. Did Diageo forget the economy is cyclical?

Like many investors, I admired Diageo’s strong global footprint but emerging markets, which drove growth for years, have been volatile. Trouble in China’s hitting a number of my portfolio holdings, including this one.

The stock looks good value today too

I’ve considered cutting my losses. Diageo now trades at a relatively cheap (by its standards) 16.4 times earnings, with a dividend yield of 3.7%. However, uncertainty over tariffs, inflation, and Gen Z makes it difficult to pinpoint a bottom. 

Not everyone’s bearish. Citi reiterated its Buy rating on Diageo on 3 February and named it a core pick for 2025. It reckons the earnings downgrade cycle is over and Diageo’s trajectory is stabilising. If it’s right, today’s low valuation and attractive yield could make this a tempting entry point.

It’s not the only one who’s upbeat. The 21 analysts covering the stock have a median 12-month price target of 2,624p. That’s a potential 20% upside from here. We’ll see.

I’m reminding myself that buying out-of-favour stocks demands patience and strong nerves. I’m fortifying myself against further drops, in the hope of benefiting when the mood swings.

There’s no doubt that the moment I sell, the Diageo share price will fly. Always happens. So I’ll hang on and hope. But it’s a brave investor who considers buying it today.

Warren Buffett’s firm Berkshire Hathaway recently made some surprising adjustments to its investment portfolio. The decisions are likely a strategic response to the current market turmoil in the US. 

However, some of them have analysts confused.

In the third quarter of 2024, the investment giant significantly reduced its holdings in Apple, selling over 600m shares. Despite this, the stock remains Berkshire’s largest holding, with the remaining stake worth approximately $70bn.

It also cut its stake in Bank of America to below 10%, adding to the firm’s growing stockpile of cash.

With the US stock market experiencing increasing volatility, Buffett seems to have adopted a cautious investment approach. That’s not surprising, considering the so-called ‘Buffett Indicator’ is near all-time highs. 

The indicator compares the total market capitalisation to GDP in the US. It’s currently above 200%, suggesting the market’s significantly overvalued. This is likely the key reason behind what appears to be a shift in strategy for the ‘Oracle of Omaha’.

An odd purchase

It’s not all about selling at Berkshire. Some of the recent capital from sales went towards building a notable position in satellite broadcasting company Sirius XM (NASDAQ: SIRI).

Between late January and early February, Berkshire purchased an additional 2.3m shares in the company, bringing its ownership to over 35.4%. This investment suggests strong confidence in the satellite communications sector, despite declining interest from consumers. 

Aside from its core service, Sirius XM also operates Pandora music streaming. This makes it a key competitor to Spotify and Apple Music. At one point it was a leader in the sector, commanding over 70% of the online music market in 2013.

But the service has reportedly been losing two-to-three million listeners a year. The stock fell 58% in 2024 and isn’t highly favoured on Wall Street, with few analysts giving it a Buy rating.

So what is behind the sudden interest from Berkshire Hathaway?

Long-term potential?

As a value-focused investment firm, it may see potential in the company’s low valuation. Recently, it’s begun adding exclusive content and expanding its streaming services in an attempt to recover market share. It’s possible these developments prompted Berkshire to consider the company’s long-term potential.

However, as it has yet to comment on the purchase, we can only speculate on the reason.

For now, Spotify, Apple and Amazon collectively account for over 90% of US music streaming subscribers. Any competitor has a tough road ahead if it hopes to make a dent in that dominance.

After posting a $1.67bn loss in its latest full-year results, Sirius XM needs all the help it can get. Earnings have recovered somewhat after a disastrous Q3 last year but they’re expected to remain flat at 66c per share in Q1 2025.

Overall, I don’t see the attraction. Yes, the shares seem undervalued right now but I don’t see a strong argument for a recovery. As such, it isn’t high on my list of stocks to consider right now. 

However, I’m not one to question the genius of Buffett and his team at Berkshire. There’s a strong possibility I’ll be proven wrong.

AstraZeneca’s (LSE: AZN) share price remains significantly down from its 3 September 12-month traded high of £133.38.

Such a drop could signal that the pharmaceuticals giant is fundamentally worth less than it was before.

Or it could flag a major bargain to be had.

To find out which it is, I took a close look at the core business and its key valuations.

How does the business look?

Weighing on the share price recently has been the ongoing investigation into the firm’s Chinese operation. These include allegations of medical insurance fraud, illegal drug imports and personal information breaches. This remains a principal risk for the company, in my view.

However, its full-year 2024 results released on 6 February showed total revenue up 21% year on year to $54.073bn (£43.59bn). Its core earnings per share (EPS) were up 19% to $8.21.

The firm also delivered nine positive high-value Phase III studies in the year. This is the final stage before a treatment can gain regulatory approval to go to market. 

AstraZeneca now forecasts total revenue to increase by a high single-digit percentage in 2025. It further projects that core EPS will rise by a low-double-digit percentage during that time.

Overall, it said that 2024 “marks the beginning of an unprecedented, catalyst-rich period for our company”. It added that it is “an important step on our Ambition 2030 journey to deliver $80bn total revenue by the end of the decade”.

Following these numbers, analysts forecast that its earnings will increase 16.97% a year to the end of 2027.

And it is earnings growth that ultimately powers a firm’s share price (and dividend) higher.

So, are the shares undervalued now?

I compare a stock’s key valuations with its peers as the first part of assessing the fairness of its current share price.

On the price-to-earnings ratio (P/E), AstraZeneca is second lowest at 31.7, above Novo Nordisk at 27.6. The remainder of the peer group comprises Pfizer at 32.4, Eli Lilly at 74.7, and AbbVie at 78.7.

So, AstraZeneca looks very cheap on this measure.

The same is true of its price-to-book ratio of 5.5 against a competitor average of 34. And it is also the case for its 4.1 price-to-sales ratio compared to a 10.5 peer average.

The second part of my share price assessment looks at where a stock should be, based on future cash flow forecasts for a firm.

The resultant discounted cash flow analysis using other analysts’ figures and my own shows AstraZeneca shares are 47% undervalued.   

Therefore, the fair value of the stock is technically £219.81.

It may move lower or higher than this due to the vagaries of the market, of course. But the three key ratio undervaluations and the huge discount to the DCF-derived fair value confirm to me how cheap the stock looks now.

Will I buy more of the shares?

Any significant dip in AstraZeneca’s share price is too tempting for me to miss.

The company has ambitious growth targets, which I think it will hit. As a result, its earnings are likely to grow at least in line with analysts’ forecasts, in my view.

This in turn should drive its share price (and dividend) higher over time.

Consequently, I will be buying more of the stock very soon.

Penny stocks have a reputation as adventurous or risky investments. Some of them are certainly more speculative than I’d like. But I reckon there are some good companies too – smaller growth stocks with the potential to deliver big returns.

In this piece, I’ll discuss two penny stocks I think could be worth considering for growth investors.

A fast-growing niche lender

Time Finance (LSE: TIME) specialises in loans to small and medium-sized businesses. The company’s two main areas of focus are lending secured by so-called hard assets (such as machinery or vehicles) and invoice factoring.

Time’s loan book has doubled to over £200m since May 2021. Its share price has also doubled over the same period.

Management recently announced plans to target a further 50% growth in lending to over £300m by 2028.

Of course, lending money is not necessarily difficult. It’s getting it back – with a healthy profit – that can be harder. This is where I think the opportunity could be.

Time Finance’s recent growth has been profitable, but not as much as I’d like to see. The company generated a return on equity of around 7% last year, which is rather average.

However, CEO Ed Rimmer believes he can increase this to “mid-teens percentages” by 2028. If Time Finance can deliver a bigger loan book and higher returns on equity, I think the stock could deserve a higher valuation.

Brokers have a price target of 112p for this penny stock, but this isn’t without risk. This business has suffered problems with lending quality and growth before. It could do so again, especially if the UK economy slows.

I wouldn’t bet the farm on Time Finance. But I think the shares are worth considering as a buy at current levels, as part of a diversified portfolio.

Scientific growth

Another penny stock on my radar at the moment is scientific instruments maker SDI Group (LSE: SDI). As its name suggests, this company owns a number of businesses that produce specialist scientific and industrial equipment.

Profits hit record levels during the pandemic, due to a surge sales of specialist PCR cameras used in Covid testing.

The company says that life sciences and biomedical markets are more challenging at the moment. Adjusted pre-tax profit for the six months to 31 October 2024 fell by 13.5% to £3.2m.

However, chief executive Stephen Brown says the company has seen “improvements from September onwards”.

Broker forecasts certainly suggest the low point may have passed for SDI. City analysts expect the company’s pre-tax profit to be stronger during the second half of the year and are forecasting a full-year result of £8.4m. Further progress is expected in 2025/26.

Meanwhile, SDI is continuing to expand through acquisitions, adding new specialist capabilities to its portfolio.

The main risk for me is that SDI’s management will overpay for acquisitions — or choose deals badly.

However, SDI shares are currently trading on just nine times forecast earnings. I think there could be a significant opportunity here, if growth gets back on track.

Brokers have a price target of 135p for the shares, more than double the current share price.