Despite being the UK’s flagship growth index, the FTSE 250 has notably underperformed over the last decade. Even when factoring in dividends, this collection of 250 UK stocks has delivered only a total gain of 34%.
Admittedly, this result is offset by the recent volatility in the financial markets. However, even ignoring the price fluctuations of April 2025, the FTSE 250’s gains are still only 47%. On an annualised basis, that translates to just 3.9%. That’s a massive slowdown compared to the long-term 11% historical return of the index.
That means anyone who invested £10,000 10 years ago would only have around £14,700 today. That’s compared to the £18,500 offered by the FTSE 100 over the same period. However, while the FTSE 250 as a whole has underperformed, the same can’t be said for all of its constituents.
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A big winner
Over the last decade, there have been plenty of successful growth stories of FTSE 250 companies making it into the top 100 UK stocks by market cap. However, the one business that seems to have stolen the show is Diploma (LSE:DPLM).
Even after joining the growth index in 2011, the industrial products distribution company continued its upward momentum. And after 12 years of market cap expansion, the business was promoted in late 2023 to the FTSE 100.
Investors who held on throughout this journey were rewarded with some pretty staggering returns. In fact, assuming dividends paid were reinvested, the total return over the last decade from this stock sits at 340%! That’s an annualised rate of return of 15.9%, outpacing even the S&P 500’s 12% over the same period. And a £10,000 initial investment would now be worth £43,804.
Still worth buying today?
Looking at Diploma’s 2024 results, management’s guidance for 2025 appeared to be quite flat versus its historical performance. Specifically, it predicted organic revenue growth of 6%, with an extra 2% coming from acquisitions. Skip ahead to the first quarter of 2025, and the business seems to be outpacing these targets. Organic sales are up 7% and acquisitive sales have jumped 5% after currency exchange impacts.
Obviously, that’s an encouraging sign. Yet management’s guidance for the full year remained unchanged. With uncertainty surrounding US tariffs, Diploma is seemingly keeping its expectations conservative. That’s not entirely surprising given the impact these import taxes could have on its complex international supply chains.
Investors sighed in relief last week when President Trump announced a 90-day pause on its global tariffs (with the exception of China). That certainly created a welcome rebound in the stock market. But with the threat of 10% tariffs still on the horizon, potential disruptions to Diploma’s business continue to loom ahead.
Nevertheless, top-notch businesses have a habit of adapting to a shifting economic landscape. That’s why, despite this risk, I remain optimistic for the long run. That’s an opinion seemingly shared by most analysts tracking this enterprise, which currently has an average 12-month share price target of 5,100p – 40% higher than current levels.
In other words, investors looking for fresh long-term growth opportunities in 2025 may want to consider buying Diploma. While past performance is no indicator of future returns, the now-FTSE 100 stock does have a habit of beating expectations.
