In a week when Meta Platforms has been working out how to sublet its data centres, one FTSE 100 stock’s been quietly insisting the picks-and-shovels trade is alive and well.\u00a0 <\/p>\n
Diploma (LSE: DPLM) \u2014 which has turned \u00a310,000 into roughly \u00a324,000 over five years \u2014 issued its Q3 update this week, and it reads like a company that hasn’t heard the AI-capex doubters. <\/p>\n
Another quarter, another upgrade <\/p>\n
Nine-month organic revenue growth hit 15%, led by Peerless (aerospace fasteners) and Windy City Wire (low-voltage cabling). Full-year guidance rose for the second time this year: <\/p>\n
That’s a 7% upgrade to the \u00a3454m consensus for adjusted operating profit on Diploma’s own analyst consensus page. That figure was only updated on 9 June and it’s already obsolete. <\/p>\n
The company’s staying on the case with acquisitions as well. It recently acquired CDM \u2013 a US defence interconnect business \u2013 maintaining its focus on markets with promising long-term prospects. <\/p>\n
A 140% five-year gain doesn’t mean the stock can’t keep going up. A look at the stock’s five-year chart shows the danger of being too quick to think it must be done now. <\/p>\n
Rolls-Royce, up 33% this year after rallying 1,100% since the start of 2023, is another example. So is it too soon to think the time to buy Diploma shares has passed? <\/p>\n
The Halma warning <\/p>\n
The catch is that fellow FTSE 100 serial acquirer Halma also reported record results recently. Unlike Diploma, the firm’s shares are now 24% below their June highs. <\/p>\n
Investors discovered a single data-centre photonics customer (rumoured to be Alphabet) supplies 20% of group revenue and roughly half its organic growth. That kind of concentration’s an obvious risk. <\/p>\n
Diploma has no customer like that. But there’s concentration at the end-market level. Aerospace, defence, and data centres are doing a lot of the heavy lifting in the firm’s recent impressive results. <\/p>\n
Given this, Meta’s move to start selling excess computing power is an early sign that data centre building might be slowing. And that’s a threat to the demand for low-voltage cabling. <\/p>\n
The valuation issue <\/p>\n
At around 6,775p, the stock trades at 27 times this year’s consensus adjusted EPS of 236.9p. That isn’t outrageous, but it also isn’t cheap by any stretch of the imagination. <\/p>\n
At that level, I think the stock’s priced for sustained double-digit growth. But the awkward detail is Diploma’s own financial model, published on its website. This guides for just 5% organic sales growth over the long term. In other words, it looks like the recent results are unusual, not the new normal. <\/p>\n
Buying shares in a company growing at 5% at a price-to-earnings (P\/E) ratio of 27 looks risky to me. At the very least, it puts a lot of pressure on Diploma’s future acquisitions. <\/p>\n
My verdict <\/p>\n
Diploma’s a superb business. It’s disciplined, cash-generative, and upgrading guidance while others seem to be under pressure. Those are the kind of things that make for great long-term investments. But at this multiple, with cyclical end markets looking unusually strong, I think it looks risky. <\/p>\n
At today’s prices, I wonder whether the better opportunity might be Halma. That’s definitely something to think more carefully about. <\/p>\n
Should you invest \u00a35,000 in Diploma Plc right now? <\/p>\n
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. <\/p>\n
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Diploma Plc made the list? <\/p>\n
\u00a0See The Six Stocks <\/p>\n
Stephen Wright does not own shares in any of the companies mentioned. <\/p>\n
The post \u00a310,000 into \u00a324,000 in 5 years: could this FTSE 100 stock be the next Rolls-Royce?<\/a> appeared first on The Twelfth Magpie<\/a>. <\/p>\n More reading <\/p>\n The Twelfth Magpie 2026 <\/p>\n","protected":false},"excerpt":{"rendered":"In a week when Meta Platforms has been working out how to sublet its data centres, one FTSE…\n","protected":false},"author":2,"featured_media":85922,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[20731],"tags":[5356,320,5764,1238],"class_list":["post-85921","post","type-post","status-publish","format-standard","has-post-thumbnail","category-rolls-royce","tag-data-centres","tag-ftse-100","tag-operating-margin","tag-rolls-royce"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116945761167196774","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/85921","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=85921"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/85921\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/85922"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=85921"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=85921"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=85921"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}