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If I requested a random pattern of buyers to call a number of the top-performing progress shares on the FTSE 100 over the previous 5 years, the possibilities are they’d in all probability choose Rolls-Royce Holdings and Lloyds Banking Group. They usually’d be proper to take action.
However I reckon 3i Group (LSE:III), the little-known funding firm, can be a great distance down their lists. Nevertheless, regardless of its relative obscurity, the group’s seen its share worth greater than triple since January 2021. This makes it the thirteenth-best performer on the index. What’s extra, over this era, shareholders have additionally loved a modest dividend.
Can it repeat this spectacular efficiency over the following 5 years? Let’s take a better look.
In search of worth for cash
Usually talking, a progress inventory tends to draw a higher-than-average earnings a number of. That’s as a result of buyers have priced of their expectations of serious revenue progress.
However at present (30 January), 3i Group has the bottom trailing 12-months price-to-earnings ratio on the index. Though this might indicate it’s low-cost, it doesn’t counsel buyers view it as a high-growth inventory.
Nevertheless, I consider that is the flawed method to take a look at 3i. As an funding automobile, it’s all about growing the worth of the companies in its portfolio. Certainly, the corporate measures its personal efficiency utilizing the return it achieves on opening shareholders’ funds. For the 12 months ended 31 March 2025 (FY25), this was a formidable 25%. For the primary half of FY26, it delivered a 13% return.
However there’s one difficulty that provides me trigger for concern.
Excessive focus
At 31 December 2025, 3i owned 62.3% of Motion, the fastest-growing non-food discounter in Europe, with over 3,100 shops. It first acquired a stake within the Dutch retailer in 2011 for £134m and has since been growing its place through the use of the dividends paid by the corporate. The group values its shareholding at £22.3bn, equal to 74% of its funding portfolio and 71% of its present market cap.
However the low cost retail sector is struggling in the intervening time. And in line with RBC, Motion’s valued at 28 instances its present 12 months anticipated earnings, which the dealer says is “on the full side”.
Am I tempted?
Surprisingly, the group’s inventory’s now altering fingers for roughly 20% lower than on the finish of October 2025. In early November, buyers took fright when 3i stated it was specializing in lower-risk investments, which may result in smaller returns. However on 29 January, the group’s shares jumped 9% after it reported a robust set of outcomes for the primary 9 months of FY26.
In addition to its non-public fairness enterprise, the group has a “counter-cyclical” infrastructure arm. This could present some earnings safety ought to financial circumstances worsen.
However I see the current share worth pullback as extra of a chance than a risk. In fact, it’s unattainable to know for positive whether or not 3i will repeat its current share worth efficiency over the following 5 years however, given its current monitor document, there’s likelihood.
On this foundation, I can see why 3i would possibly attraction to long-term progress buyers. However I’ve issues that its valuation of Motion won’t be justified by its underlying efficiency. Subsequently, acknowledging that it’s tough valuing non-public firms, I feel there are higher alternatives elsewhere.
