A FTSE 100 star stock that’s ‘only getting started’
Shares in this blue-chip company have just rocketed and City analysts believe it’s ‘one of the safest growth names’ in the sector. Graeme Evans explains why.
18th March 2026 14:22
by Graeme Evans from interactive investor
The value of Diploma (LSE:DPLM) today touched £8 billion for the first time after another profit upgrade highlighted the quality compounder’s strong position in structurally growing markets.
Businesses within the Diploma portfolio provide the bolts that hold planes and race cars together, design the seals that make wind turbines work and help surgeons to find the best solutions to deliver better patient outcomes.
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Shares today surged by as much as 19% to 5,995p after the FTSE 100-listed company made a significant upgrade to its 2026 guidance, representing an upside of 13% on the City’s consensus operating profit forecast.
The improvement was driven by the first-half performance of Diploma’s aerospace and defence-focused fasteners business Peerless, which it acquired in 2024.
Diploma said “favourable and sustainable” aerospace market conditions meant the business, which accounted for 13% of group revenues in 2025, is set to deliver another “outstanding” organic growth performance in the first half of the year.
The read-across from the update benefited Rolls-Royce Holdings (LSE:RR.) and the shares of GKN Aerospace business Melrose Industries (LSE:MRO) as they rose 36p to 1,283p and 11.4p to 523p respectively.
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Diploma said other businesses in its biggest unit of Controls are also growing strongly, including Wiltshire-based firms Interconnect Solutions and Clarendon Speciality Fasteners.
Illinois-based Windy City Wire, which generated a fifth of the company’s revenues in 2025, is also said to have performed well as the low voltage wire and cable solutions business targets markets including data centres and digital antenna systems.
This business was acquired in 2020 as chief executive Johnny Thomson made his biggest move towards overhauling a portfolio that was then narrower and more exposed to industrial cycles.
A focus on attractive markets in areas such as aerospace, clean energy, diagnostics and data centres has since made Diploma’s growth much more structural.
More than half its revenues are now generated in North America, where local supply chains limit the impact of US tariffs. The group secured about 18% of its revenues in the UK.
Diploma has grown adjusted earnings per share at an average rate of 18% over the past seven years, including in November’s annual results when organic revenues growth topped expectations at 11% and the operating margin improved by 160 basis points.
Thomson said in the 2025 annual report: “We have achieved a lot. But we’re only getting started. The opportunities ahead are vast, and exciting. We are building an ever-stronger platform to continue delivering sustainable quality compounding long into the future.”
Guidance for this year now points to organic revenues growth of 9% and an operating margin of 25%, up from 6% and 22.5% respectively in January’s trading update.
The group’s strong organic growth record has been enhanced by its acquisition momentum, having completed eight deals worth £130 million over the preceding two quarters.
Diploma also boasts a 25-year record of dividend growth, having paid 44.1p a share at the end of January as part of a 5% rise to 62.3p a share for 2024-25.
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The shares are now more than 60% above April’s post-tariffs low and more than double their level of two years ago. Today’s rise also means they are back above where they were prior to the start of the Middle East conflict.
Diploma trades on a multiple of about 25 times forecast 2026 earnings, which RBC Capital Markets said was a justified premium given the company’s strong record.
RBC, which has a price target of 6,200p, said: “We continue to see Diploma as one of the safest growth names in the wider sector, with limited value elsewhere at the ‘quality end’.
“We see incremental positive earnings per share momentum from M&A, and believe the valuation premium is warranted given the outstanding financial metrics and track record.”
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