With a quarter of the year already gone, I continue to think there is some excellent value to be found in the UK stock market. The flagship FTSE 100 index has already hit an all-time record high this year. It has had positive momentum so far in 2025, moving up 4%. That is equivalent to half of its total 8% gain over the past five years.

I still think there is value in the index. Here are two shares I think investors should consider at the moment that look like potential bargains to me.

JD Sports

Retailer JD Sports (LSE: JD) has grown from nothing over the past four decades to become a leading seller of sportswear not just in the UK, but internationally too.

That may sound like a hard business to defend, as a rival can come along and undercut on price. But JD has quite a few things that help set it apart. For example, it has a large estate of shops and continues to add hundreds more annually.

It also has unique products, a strong brand, and a large base of existing customers. The company has proven able to generate significant profits. It continues to plough a sizeable chunk of them into growing the business. So I reckon JD’s long-term earnings potential may be even better than its current performance suggests.

Despite all that, however, the FTSE 100 share has slid 14% over the past five years. That shop opening programme has been costly and the business faces other risks, including weak consumer sentiment potentially hurting demand.

Still, I continue to like the long-term prospects for JD Sports and reckon its current share price is potentially a bargain for investors to consider.

Diageo

Another potential bargain from the blue-chip index for investors to consider is brewer and distiller Diageo (LSE: DGE). It is the force behind a plethora of drinks ranging from Guinness to Smirnoff.

Making drinks at scale and selling them expensively thanks to fancy branding might sound like a license to print money. Indeed, Diageo is strongly profitable. Its earnings streams are so good that it has been able to raise its dividend per share annually for over three decades.

Despite that, the share has recently touched its lowest price in years. It is back to a level last seen eight years ago.

There are reasons for this, of course.

Soft customer demand in Latin America has hurt sales volumes and could be a warning of what is to come more widely. Younger consumers are drinking less booze than previous generations, while weak economic conditions in some markers could see demand for pricy tipples falling.

Nonetheless, the price has come down a long way and I continue to see Diageo as a high-quality company. I reckon Diageo is a share investors should consider now, while it sells close to a multi-year low share price.

Until a few years ago, I wasn’t really interested in receiving passive income from a dividend stock. I was focused on building up my portfolio almost entirely through growth shares.

As the grey hairs started to accumulate though, I grew partial to a dividend. Though, I wouldn’t go as far as oil magnate John D. Rockefeller, who purportedly said: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

When growth stocks take a tumble, as they are doing now, thanks to tariff fears, then at least I can console myself with the possibility of dividends. I can use the cash to either add to my growth stocks while they’re down or reinvest back into dividend shares to aim for higher income.

Moreover, it’s a bit of a myth that the share prices of dividend stocks don’t go anywhere. Looking at the four high-yield FTSE 100 stocks in my portfolio, three of them performed strongly on a total return basis (dividend and share price) last year.

	2024 total return*	Dividend yield
Aviva	15.7%	6.5%
British American Tobacco	35.7%	7.5%
HSBC	33.7% (includes special dividend)	5.9%
Legal & General	-0.2%	8.8%

A double-digit yield!

As a result, I would be willing to add another dividend stock to the mix, assuming I can find one that appears suitably attractive. Enter M&G (LSE: MNG), the asset management firm that demerged from Prudential in 2019.

At its current share price, M&G is sporting a mouth-watering 10% dividend yield. This means it’s the highest-yielding stock in the FTSE 100.

But this also makes me nervous because previous ultra-high yielders have ended up cutting their payouts. For example, the yield on Vodafone shares was above 11% a year ago, the highest in the Footsie. Then the telecoms giant slashed its payout by 50%!

This makes me wonder if the market is assuming a big M&G dividend cut is on the horizon (always a possibility).

Increasing market mayhem

Then again, just back in March, the firm said: “Given our confidence in the outlook of M&G, I am delighted to announce that today we are moving to a progressive dividend policy, starting with a 2% increase for the 2024 total dividend per share.”

This doesn’t sound like a big reduction is imminent, though M&G is somewhat at the mercy of investor sentiment. This is being severely tested at the moment, with President Trump’s tariffs causing mayhem.

Last year, M&G saw fund outflows, though this was offset by positive market movements. Between 2025 and 2027, it aims to grow adjusted pre-tax operating profit by 5% or more per year, and to generate £2.7bn of operating capital.

However, as I type, Goldman Sachs has just raised the probability of a US recession to 35%, up from 20%. So rising levels of investor angst could lead to M&G fund outflows and lower profits. This is a concern I have here.

My decision

Weighing things up, I’m undecided whether this is the worst or perfect time to invest. What I’m tempted to do then is add shares to my portfolio every three months to work my way into a position this year.

This should reduce risk, while also allowing me to take advantage of the huge 10% yield currently on offer.

Tough trading conditions have whacked the Pets at Home (LSE:PETS) share price in recent times. The FTSE 250 share fell another 11% on Monday (31 March) too after it slashed profit guidance for the upcoming financial year.

Britain’s largest dedicated petcare retailer said that “a challenging and volatile UK consumer backdrop” had persisted in recent months, and predicted that “the current market conditions and subdued consumer backdrop to continue into the new financial year“.

As a result, Pets estimates that full-year underlying pre-tax profit will fall to between £115m and £125m during the 12 months to March 2025. That’s lower than the £133m it says it’s on course to bank in financial 2024.

But despite the bad news, I’m wondering if now represents a good dip buying opportunity for me.

Cost pressures

Don’t get me wrong. There’s a good chance Pets at Home’s shares could remain under the cosh given the worsening economic outlook and predictions of rising inflation.

The company’s troubles aren’t consigned just to the top line, though. Like other major retail chains, near-term earnings are also under pressure from rising costs.

Changes to the National Living Wage and National Insurance will cost the company £18m in financial 2026, it said. New packaging regulations and variable pay rebuild will cost it another £2m and £18m, respectively.

Looking good longer term

Yet as a long-term investor, I’m prepared to endure a little temporary pain if the longer-term outlook remains compelling. It’s why Pets at Home’s shares remain highly attractive to me despite its current problems.

Make no mistake: the outlook for the UK petcare market remains extremely bright. And with its ‘Pets Club’ loyalty scheme helping cement its market leader status (share: 24%) — the number of members currently stands at record highs — the FTSE 250 retailer is in good shape to capitalise on its opportunity.

Researchers at IMARC think the market will grow 5.7% a year between now and 2033, driven by “increasing pet ownership, growing focus on pet health, significant technological advancements, such as smart devices and telemedicine, rising humanization of pets, and heightened demand for premium products“.

Pets has a great record of outperforming the broader market. New digital platforms to boost cross-selling and sales frequency mean this is likely to continue. I’m also excited by further strong growth at its veterinary services division as site expansion continues. Like-for-like sales here rose 18.2% in the first half.

Trading at a discount

I’m also attracted by the excellent value for money Pets at Home shares currently provide.

Following Monday’s price fall, the retailer trades on a price-to-earnings (P/E) ratio of 9.4 times. To put this in perspective, the five-year average for Pets shares sits significantly higher, at around 19 times.

The share price has dropped around a fifth over the last 12 months. But history shows that weakness in the petcare market tends to be very short-lived. When I next have cash to invest, I’ll consider buying the FTSE 250 stock to exploit a potential rebound.

The Lloyds Banking Group (LSE: LLOY) share price fell 3% in volatile trading when the market opened Monday morning (31 March), before steadying.

Close Brothers Group (LSE: CBG) lost 8% by midday, and we see a 34% crash over the past 12 months. It looks like nerves are on edge ahead of the car-loan mis-selling case due to kick off at the Supreme Court on 1 April.

What’s it about?

In October 2024, the Court of Appeal ruled it illegal for lenders to pay commissions to car dealers without fully-informed consent from customers. And now, Close Brothers and MotoNovo Finance are challenging that.

What was happening was car dealers were arranging loans for customers and being paid a commission on the loans from the lenders, apparently without the borrowers being made clearly aware of it.

The Financial Conduct Authority (FCA) has been urging people who think they’re victims of mis-selling to make claims. Lenders were given until December to respond. But that could be up in the air now, depending on what happens next.

What might it cost?

We don’t know what the scale of any compensation might be like. But Alex Neill of Consumer Voice says that if the Supreme Court backs the Court of Appeal it “would be huge and would be on the scale of PPI, with compensation payments running into the tens of billions of pounds.”

Lloyds is one of the biggest lenders caught up in this. At full-year results time, the bank revealed it had set aside a further £700m to cover potential costs. That’s in addition to 2023’s £450m, taking the total to £1,150m. It’s a significant portion of the £4.5bn pre-tax profit reported for the year. And if might get bigger.

The pain could be proportionally more severe for Close Brothers. Reporting on its first half in March, the company said it expects full-year operating expenses to rise by £200m as a result, and made a £165m provision in the half. That’s a lot less than Lloyds in absolute terms, but this is a bank with a first-half operating income of just £390m. It meant a £103m operating loss before tax.

What should investors do?

There’s one main question for us. How much of the potential bad news do we think is already factored into the share price? At Lloyds, there’s a forecast price-to-earnings (P/E) ratio of 11 on the cards.

That’s the highest it’s been for a few years. And I think it might be too much if the financial pain turns out worse than feared. But we have to contrast it with a fall to under seven by 2027 if earnings growth foreacasts are accurate, which looks cheap.

At Close Brothers, a forecast loss makes such measures meaningless. And the tiny profit predicted for 2026 would put the P/E at 60, really not saying much at all.

We each have to decide whether or not to wait and hope. And I expect most people have already made up their minds. It certainly reminds us of the importance of diversification.

Lloyds remains a hold for me, though if I didn’t have any I’d consider buying. And I see Close Brothers as a recovery candidate worth considering too.

Pets at Home Group (LSE: PETS) was trading significantly lower today (31 March). As I write, the FTSE 250 stock is down 13% to 205p, bringing the four-year decline to 50%. Yikes!

Here, I’ll look at what has caused today’s sell-off, and whether I think the stock now looks attractive.

Trading update

Pets at Home is the UK’s leading one-stop destination for pet owners, offering a wide selection of food, toys, and accessories in more than 450 stores. 

It also provides grooming services. My mate likes to pamper his pooch at one of the firm’s dog spa salons, meaning she gets shampooed, nails clipped, breath freshened, the full works, for a pretty reasonable price. 

The firm also offers veterinary care through its Vets4Pets brand, which now represents more than half of underlying profits.

The culprit for today’s stock price fall was a trading statement put out by the firm. In the 12 months to 27 March (FY25), underlying pre-tax profit is expected to be £133m, in line with analysts’ consensus. However, it was guidance for the current year (FY27) that was the main issue. It expects pre-tax profit to fall 6%-13% to £115m-£125m.

So, Pets at Home shareholders have weak guidance and the likelihood of falling profits to blame for today’s slump. Basically, the outlook had less bite than expected.

The UK economy strikes again

One problem here is that a “challenging and volatile UK consumer backdrop” is hurting its pet retail business. It expects these conditions to continue throughout the year.

We’ve seen this trend recently with other UK consumer-facing businesses, including Greggs and JD Wetherspoon. Both of those FTSE 250 stocks are also in the doldrums.

Another problem flagged up by Pets at Home is rising costs related to higher wage and National Insurance contributions. This is estimated to cost £18m, while new packaging regulations, the reinstatement of variable pay, and higher marketing costs will also add pressure.

The stock looks cheap

It’s not all doom and gloom though. The company is accelerating the rollout of new veterinary practices, with plans to deliver at least 10 this year. And it is investing £3m in a new, capital-light insurance offering, which its says will “leverage our best-in-class consumer data, large customer base and leading brand.” 

Meanwhile, it will make efficiency savings where possible to make sure that operating costs rise by no more than 5%. And capital expenditures will now return to normalised levels of less than £50m. 

The stock was already looking cheap, trading at around 10 times earnings. But it now offers a 6.2% dividend yield, which the firm says it remains “committed” to. 

So there could be a fair bit of value on offer here for contrarian investors willing to take a longer-term view on the stock. A lot of the pessimism might now be priced in.

Then again, I thought that about JD Sports stock at the start of the year and that just keeps sliding ever lower! 

Am I tempted to have a nibble?

Unfortunately, the economic situation in the UK remains dire and many pet owners are skint. Things aren’t expected to improve anytime soon and there’s not much the company can do about any of this.

Therefore, I’m not tempted to buy the shares, even after today’s double-digit dip.

Time is ticking for me to max out my ISA allowance before the current tax year slams shut. So I’m searching for the best FTSE 100 stocks to buy to make full use of my Stocks and Shares ISA.

Any of the £20k allowance I don’t use can’t be extended into the 2025/26. Of course, I don’t actually need to buy any securities to make use of it. Rather, I just need to have the money deposited in my Stocks and Shares ISA to shelter myself from capital gains tax and dividend tax.

But the exceptional value on offer from many Footsie shares means there’s no point in my delaying. With this in mind, here are just a couple of blue-chip stocks on my watchlist today.

Fresnillo

Soaring precious metals have powered Fresnillo‘s (LSE:FRES) share price to two-year highs. Yet at 947.5p per share, the gold and silver producer still offers excellent value on paper.

A forward price-to-earnings (P/E) ratio of 14.9 times isn’t much to get excited about. But its corresponding P/E-to-growth (PEG) ratio is.

With City analysts tipping a 126% earnings jump in 2025, Fresnillo shares deal on a PEG well below the value threshold of 1, at 0.1.

There’s no guarantee that safe-haven demand for precious metals will keep rising. Commodity markets are notoriously volatile, meaning Fresnillo remains at risk of a price reversal.

But as things stand, things are looking good for silver and gold (which last week hit its 17th new record high in sterling terms in 2025 alone).

Concerns over the geopolitical and economic policies of the US Trump administration continue to mount. Fears over government debt, and escalating war in Europe and the Middle East, are also supporting flight-to-safety assets.

Fresnillo’s portfolio of eight operating mines makes it an especially attractive gold stock to me. Unlike smaller operators, it’s able to better absorb localised problems at group level.

Coca-Cola Europacific Partners

Coca-Cola Europacific Partners (LSE:CCEP) has just rolled into the FTSE 100 from the FTSE 250. It joins Coca-Cola HBC, which sells the same range of market-leading drinks (including Coke, Fanta, and Costa Coffee), just in a different part of the world.

As its name implies, the business sells product into European and Asian markets, 31 in all. Its footprint comprises a mix of developed markets (such as the UK, Germany, and Australia) along with emerging regions (including Indonesia and the Philippines).

This gives the company stability as well as exciting sales opportunities in faster-growing territories. It’s a mix that drove sales 11.7% higher over the course of 2024, to €20.4bn.

Like Fresnillo, Coca-Cola Europacific’s forward P/E ratio of 20.6 isn’t especially low on paper. However, a predicted 27% earnings increase this year also leaves it dealing on a rock-bottom PEG multiple of 0.8.

The business has to spend fortunes in marketing to stay ahead in a competitive industry. It’s also vulnerable to adverse exchange rate movements.

But on balance, I think it’s a top stock to consider this ISA season, along with that blue-chip precious metals producer.

Palantir Technologies (NASDAQ: PLTR) stock has been one of the biggest winners of the artificial intelligence (AI) revolution so far. It’s up by a whopping 1,237% since the start of 2023!

While not as dramatic, the 12-month return of 273% is nothing to be sniffed at. It means an investor who put £10,000 into the AI growth stock one year ago would now have £37,300! Nice.

Mind you, our investor would have been sitting on about £54,000 in mid-February when the Palantir share price peaked at $124. It’s currently at $85, meaning it has plunged 31% in six weeks.

As a reminder, Palantir is a software company that helps governments and businesses make sense of massive, complex datasets. Its newest offering, Artificial Intelligence Platform (AIP), enables customers to integrate generative AI into their operations.

AIP is fuelling accelerating revenue growth, which has sent the stock soaring. But should I invest after this 31% dip?

AI-fuelled growth

It’s impossible not to be impressed by the company’s growth. In the fourth quarter, revenue in its US business surged 52% year on year to $558m, driving total revenue 36% higher to $828m.

Full-year revenue grew 29% to $2.87bn, supported by a 54% jump in US commercial revenue. This is important because Palantir started out in 2003 helping intelligence agencies analyse data to track threats after 9/11. Then it moved into other areas of government, before finally pushing into the private sector with its Foundry platform.

The commercial opportunity, especially in AI, appears massive and Palantir is laser-focused on capturing it.

The world is in the midst of a US-driven AI revolution that is reshaping industries and economies, and we are at the centre of it…This is the software century, and we intend to take the entire market.

Palantir CEO Alex Karp

The company’s AI boot camps are helping prospective customers understand how the technology can help improve their business. The firm moves fast from concept to real-world AI use cases, tailored to each organisation’s data and needs. This helped drive its customer count 43% higher in the fourth quarter!

Meanwhile, Palantir’s adjusted free cash flow reached $1.25bn last year, representing a robust 44% margin.

Risk/reward dynamic

Clearly then, this top-notch software company is growing like wildfire. The sticking point for me here though is valuation. Right now, the stock’s price-to-sales (P/S) ratio is a sky-high 73.

This is the type of multiple I’d expect to see from a small growth firm, which Palantir isn’t, or one growing revenue by triple digits. However, Palantir is expected to grow its top line by around 31% this year then 27% in 2026. Very strong, but not spectacular when considering the hefty valuation.

Looking at 2026 forecasts, Palantir is trading at a forward P/S ratio of about 42. And the forward price-to-earnings multiple is 108. This means the stock is priced for absolute perfection, meaning there’s significant valuation risk if the firm’s growth slows more than expected.

Also, it looks likely there will be US defence budget cuts, which is creating uncertainty. Then again, it’s possible Palantir’s AIP could benefit due to the efficiency it helps unlock.

If the stock keeps falling, I may reconsider. But I think there are safer AI/growth stocks for my portfolio right now.

The Nasdaq Composite remains in correction territory — more than 10% below a recent high. So I’ve been searching for US growth stocks to consider for my portfolio in April.

While I found a handful of candidates, these two didn’t make the cut.

AppLovin

The first is AppLovin (NASDAQ: APP), whose shares soared over 700% last year. However, they’ve crashed 46% since Valentine’s Day. That was a heart-wrenching plunge for shareholders, although the stock is still nearly 300% higher than this time last year!

AppLovin develops adtech software for mobile app developers, helping them monetise their applications. Last year, revenue jumped 43% to $4.71bn, while net profit skyrocketed 343% to $1.58bn.

This profit surge was driven by its AI engine, AXON, which significantly boosted ad targeting performance. It’s also expanded beyond mobile games into e-commerce ads. 

Why the price fall?

However, three separate reports from short sellers in a month have hammered the price. The most recent one from Muddy Waters claimed AppLovin may have been secretly pulling user ID data from platforms like Google, Facebook, Snapchat, and TikTok, potentially violating terms of service. This echoed previous reports that accused the firm of fraudulent activities.

Fuzzy Panda (one of the other short sellers) wrote to the S&P 500 inclusion committee in a bid to keep the company out of the index. It said: “AppLovin’s recent revenue growth has been based in data theft, revenue fraud, and the exploitation of our country’s laws protecting children.”

Now, AppLovin strongly denies these allegations. CEO Adam Foroughi wrote: “The reports are littered with inaccuracies and false assertions.” And inclusion in the S&P 500 might boost AppLovin’s valuation — not what short sellers want, as they stand to benefit when the stock falls.

If it transpires that the company has done nothing wrong, the share price could rebound strongly. Analysts still expect net profit to rise 39% this year. However, given the uncertainty surrounding the business model here, I’m avoiding AppLovin shares.

IonQ

The second stock is IonQ (NYSE: IONQ). This one has also been on a wild ride, soaring 1,200% between early 2023 and the end of 2024, only to plunge 45% this year.

IonQ is focused on developing general-purpose quantum computers and supporting infrastructure. Its technology is accessible through cloud platforms like Amazon Web Services, Microsoft Azure, and Google Cloud, allowing users to experiment and apply quantum computing in their respective fields. 

Quantum computers use the rules of quantum physics to process information in a totally different way from regular computers. If fully realised, they could revolutionise everything from medicine and materials science to cryptography.

IonQ’s revenue surged 95% last year to $43.1m, exceeding its own guidance. Wall Street expects that to nearly double this year, so this is a high-growth stock, for sure. However, profits aren’t expected for years and the price-to-sales multiple is a sky-high 113.

Meanwhile, it faces daunting competition from deep-pocketed tech giants like IBM, Google, and Microsoft. Even AI chip king Nvidia is now entering the quantum computing research space.

IonQ is a fascinating stock, but it’s very speculative. For me, it’s far too early to start picking winners in the quantum space.

With this year’s Stocks and Shares ISA deadline days away, many investors will be out hunting for cheap shares to add to their portfolio.

Cheap shares happen to be my favourite type. I love buying top quality companies after their stock has dipped, in the hope of picking up a bargain.

Yet this isn’t a foolproof strategy. Sometimes shares are cheap for a reason. Instead of recovering, their plight might just get worse. As ever with investing – no guarantees!

With that in mind, I decided to call in a bit of outside help, from ChatGPT.

ChatGPT got Barclays shares all wrong

ChatGPT isn’t a stock picker and I don’t take its suggestions too seriously. My latest request soon reminded me why.

I couldn’t really argue with its first pick, FTSE 100 bank Barclays (LSE: BARC). I’ve consider buying it, but I already have plenty of exposure to the sector via rival Lloyds Banking Group.

But ChatGPT quickly blotted its copybook by saying Barclays “screams undervalution” trading at a lowly price-to-earnings (P/E) ratio of five. That’s plain wrong. Its trailing P/E is actually 8.5 times. Not a massive difference, but enough.

It gets worse. My unreliable robot ‘bro then said the Barclays share price has “underperformed, down around 10% over the past year”. Wrong again! It’s actually rocketed more than 70%.

At this point, I gave up. AI is obviously using out of date information. I do think Barclays is worth considering today, although I’m wary because the shares have overperformed, and may struggle to maintain their recent momentum. Which is the exact opposite of what ChatGPT is saying.

I wouldn’t touch Vodafone shares

Its second pick was FTSE 100 telecoms giant Vodafone (LSE: VOD), which it calls “a beaten-down telecoms stock with recovery potential”.

Vodafone terrifies me. It’s like a giant monster of wealth destruction. It lures unsuspecting investors in with a dazzling yield, only to chew up their capital and slash sharehholder payouts too.

The Vodafone share price has climbed 5% over the last year, but it’s down 40% over five years. At around 72p per share, it’s trading at 1996 levels.

ChatGPT acknowledges say that “Vodafone has been a disaster for shareholders for the last five years” then jauntily adds: “But with a 6.9% dividend yield and a turnaround plan in place, it could be a bargain at today’s P/E of around 7”.

Wrong! Today’s dividend is actually 5.3%. And wrong again! The P/E is 11.6%. That’s still below the average FTSE 100 of around 15 times, but not as cheap as ChatGPT thinks.

It also claims that the telecoms sector is defensive, but a quick glance at Vodafone and rival BT group suggests it’s actually intensely volatile. At least the chatbot was right to highlight Vodafone’s huge debt pile of around €36bn, which it calls “challenging given today’s high interest rates“.

The latest Vodafone turnaround plan may succeed where the others failed, but it’s not a stock I would consider buying today. Personally, Vodafone still terrifies me. And so does ChatGPT.

Over the last 10 years, Diploma (LSE:DPLM) stock has outperformed the FTSE 100 by a long way. But a 13% fall in the last month could be my opportunity to start buying the shares.

While growth has slowed recently, investing is about looking past near-term challenges at long-term prospects. And from this perspective, I think the company looks very strong.

Industrial distribution

Diploma is a collection of businesses focused on distributing industrial components and life sciences equipment. Importantly, it focuses on areas where it can add value for customers. 

This happens in several ways. It can involve helping companies expand into new geographies, supplying highly complicated parts, or providing mission-critical components at speed. 

Focusing on differentiated products and services helps Diploma maintain strong margins. And it has a strong competitive position that’s difficult for other companies to disrupt.

A mix of acquisitions and organic growth has caused sales to rise from £334m in 2015 to almost £1.4bn in 2024. But growth has been tepid recently, which is why the stock has been falling.

Short-term challenges

In 2024, Diploma’s sales grew by 14%, compared to 19% the year before. And most of this was from buying other businesses, with organic growth coming in at 6%, down from 8% in 2023.

The outlook for 2025 is also somewhat underwhelming. The firm is expecting organic growth to again be somewhere in the region of 6%, with another 2% from acquisitions already confirmed.

Obviously, there’s a long time left in the year and opportunities to acquire other businesses might present themselves. But there are no guarantees and this can be a risky strategy.

I think this is why Diploma shares have been falling – it’s a growth stock with a disappointing outlook for the near future. Nonetheless, I think it’s well worth a closer look.

Valuation

A few things are worth noting when it comes to Diploma’s valuation. The first is that it trades at a price-to-earnings (P/E) ratio of 41, which is high by just about any standards.

Investors, though, should note that this probably isn’t the best metric to use. The company’s earnings per share involve a number of unusual costs that might be seen as distorting. 

These include £59.4m in amortisation, which are non-cash expenses, and £13.8m in acquisition and restructuring costs, which should be one-off. And this is worth paying attention to.

Adjusting for these means the fall in the Diploma shares price brings the P/E ratio closer to 25. That still reflects optimism about future growth, but it’s much more reasonable.

Should I buy?

I don’t think investors should be too concerned about Diploma’s recent reliance on inorganic growth. One reason is the firm has a natural advantage when it comes to making acquisitions.

The businesses it buys tend to be small and there’s often less competition pushing prices up. So I’m still optimistic about its future prospects. 

I’m seriously considering adding it to my portfolio in April. The only question in my mind is whether any of the other opportunities I’m currently looking at might be even better.