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FTSE shares have been on a tear, with the FTSE All-Share up roughly 33% during the last two years. Because of this, many UK shares now look costly on conventional valuation measures like price-to-earnings (P/E) ratio.
That kind of rally typically units the stage for a pointy pullback. For affected person buyers, such a market wobble can present a once-in-a-decade alternative to purchase some high quality shares at cut price costs.
So which UK corporations look overvalued proper now?
A inventory I’ve obtained my eye on
One standout enterprise that matches this narrative is Halma (LSE: HLMA), the security, well being and environmental expertise group listed in London. Described as a portfolio of life‑saving expertise corporations, it’s been rising steadily for many years.
Basically, it’s a group of specialist companies that make a spread of merchandise together with hearth detection techniques, healthcare diagnostic instruments and environmental monitoring kits. With broad worldwide attain, it serves clients throughout the UK, US, Europe and the Asia-Pacific area.
Financially, it appears to be like in glorious form. Within the 12 months to 31 March 2025, it delivered file income of about £2.25bn, up round 10.52% 12 months on 12 months. It additionally booked file revenue, marking 22 consecutive years of near-unbroken earnings development.
The group’s adjusted working margin sits within the low‑20s and money era is robust. Critically, returns on invested capital (ROIC) are within the mid‑teenagers — all indicators of a excessive‑high quality, capital‑environment friendly enterprise.
Can it continue to grow?
Taking a look at latest figures, Halma’s efficiency is undeniably spectacular. Income’s up 11.74% 12 months on 12 months and earnings jumped 21%. Return on fairness (ROE) of 18.6% signifies that it’s turning shareholder capital into revenue very successfully, which is strictly what lengthy‑time period buyers prefer to see.
The stability sheet additionally appears to be like stable, with web debt to EBITDA beneath one. This offers administration loads of room to maintain investing in analysis and growth, acquisitions and a rising dividend. In actual fact, Halma’s grown its dividend for greater than 40 consecutive years by at the very least 5% yearly, which is a uncommon file even by FTSE requirements.
However how’s the valuation?
Up greater than 40% over the previous 12 months, Halma shares now commerce on an eye-wateringly-high ahead P/E ratio of 35. On high of that, the value‑to‑e book (P/B) ratio is 7.5 and P/E‑to‑development (PEG) ratio 2.02.
These are all wealthy multiples, suggesting future success is largerly priced in. If outcomes disappoint, the value may take a pointy dive. That’s why shopping for on the present worth isn’t enticing — however a short market dip may make all of the distinction.
Ultimate ideas
Market dips may be scary however sensible buyers recognise the opportunties they provide. Nonetheless, even at a lower cost, Halma isn’t with out threat. Because it depends on making frequent acquisitions to complement natural development, overpaying for offers or struggling to combine them may drag on returns.
Nonetheless, as a highly-established market chief with constant demand, it’s simply the sort of high quality inventory that seldom sells low cost. For UK buyers eager to seize a slice of this pie at decade-low costs, it’s value contemplating if the market dips.
However that’s not the one high-quality FTSE share I’ve had my eye on just lately…
