Insider: bosses buy this top pick plus firm with robust outlook

Two Diploma (LSE:DPLM) directors have paid record prices for the quality compounder’s shares in dealings that align with the City’s view of further upside for the FTSE 100 high-flyer.

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Senior independent director Katie Bickerstaffe spent £20,000 at 5,645p, while fellow non-executive Ian El-Mokadem doubled his stake with a move worth £28,000 at 5,615p.

Their purchases on Wednesday were made after Diploma posted a “very strong” first-quarter trading update, with organic revenue growth of 14%. Tougher comparators mean it continues to expect a full-year rise of 6%, alongside a margin of about.22.5%.

The shares finished the week even higher at 5,705p, up from 4,300p a year ago but still some way short of Bank America’s new estimate of 6,300p and Peel Hunt’s 6,450p. They lifted their respective target prices by 100p and 320p following the update.

The latter noted that the Diploma was still at a 20% discount to peers. The broker believes Diploma deserves a multiple of 32 times forecast earnings, adding: “We believe it will continue to re-rate and narrow the valuation gap.”

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The group’s portfolio of businesses in seals, controls and life sciences create solutions that make customers’ lives easier, with the value far greater than the cost of the product. Flagship businesses within Diploma’s decentralised model include Chicago’s Windy City Wire, which makes premium low voltage wire and cable.

It has grown adjusted earnings per share at an average rate of 18% in the past seven years, including “another great year” when it published annual results in November. Organic revenues growth topped expectations at 11%, while the operating margin improved by 160 basis points.

Diploma boasts a 25-year record of dividend growth, with the latest distribution of 44.1p a share due in accounts on 30 January as part of a 5% rise to 62.3p a share for 2024/25.

The group’s strong organic growth record has been enhanced by its acquisition momentum, with four businesses added in the first quarter of this year for about £75 million.

These have boosted Diploma’s capabilities in European aerospace fasteners, the hydraulic seals aftermarket in Australia and in machining parts.

The fourth deal involved Spring Solutions, a UK based specialist supply chain management and procurement company serving defence customers including BAE Systems (LSE:BA.) and Thales (EURONEXT:HO).

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Deutsche Bank, which has a price target of 6,200p, said: “We believe these acquisitions have been completed at typical Diploma acquisition multiples (6-8 times earnings) with associated earnings per share accretion.”

City firm Berenberg regards Diploma as one of its top picks of the business services sector after recently lifting its price target to 6,600p.

It said: “We continue to favour companies that drive their own destiny and grow earnings regardless of markets, under quality compounding models.”

A slice of Pi

Raspberry Pi Holdings (LSE:RPI) chief executive and founder Eben Upton has bought his company’s shares at a price cheaper than when they floated on the stock market in June 2024.

He increased his stake in the microcomputer maker by spending £60,000 at a price of 271.4p, which compared with 280p in the oversubscribed initial public offering (IPO).

Upton’s purchase took place on Tuesday after he declared his delight at the company’s “standout performance” in 2025, with underlying earnings set to be no less than $45 million.

The 20% year-on-year rise came in at least 10% ahead of the forecast of analysts at Jefferies.

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However, shares slumped more than 9% to 263p at one point as the company said its outlook continued to be impacted by the recent rise in spot prices for the dynamic random-access memory (DRAM) used in its single board computers and compute modules.

It said some major suppliers were facing limitations of supply at high densities as manufacturing capacity is diverted to meet the surge in AI data centre investment.

The company has taken multiple mitigating steps and remains confident that the issue will not prevent its unit shipments from growing in the first half of the new financial year.

However, second half profitability will depend on a variety of factors relating to DRAM pricing trends, high-density supply availability, the effectiveness of product variants to mitigate the issue and customer reaction to any further price increases.

Upton said: “Despite a challenging memory supply environment, our supply chain discipline has enabled us to meet expanding customer demand.”

As well as substantial inventory buffers, he said the company benefited from long-standing and growing industrial OEM (original equipment manufacturers) relationships. These typically account for 70% of its demand.

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The FTSE 250-listed shares recovered to reach 299p by Friday. They had been as high as 766p last January, when interest was boosted by a pipeline of opportunities among OEM customers.

City firm Jefferies last week cut its forecasts and price target from 610p to 420p. However, it added: “Beyond near-term DRAM-related uncertainty, the longer-term outlook remains robust in our view.”