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The FTSE 100 has had some strong performers over the last year. For example, Rolls-Royce, Imperial Brands, and BT are all up more than 50%. The best-performing stock in the Footsie over this period may surprise you though. Because it’s not a stock that’s very popular.
Strong returns
Believe it or not, the top performer in the index over the last year is wealth management firm St. James’s Place (LSE: STJ). It’s up about 132%, meaning that it has more than doubled investors’ money.
For context, the FTSE 100 itself is only up about 5% over the last 12 months. So, the stock has trounced the index.
I need to point out, however, that the share has come from a really low base. This time last year, it was very much out of favour and had just fallen from 1,700p to 400p – a huge decline.
And even after the 132% gain, it’s still well below where it was sitting at its highs. In other words, anyone who invested near the highs would still be under water.
But it shows that buying a stock when it’s really out of favour can potentially pay off. A gain of that size over 12 months is a fantastic return.
Further gains to come?
Could there be further big moves on the horizon here? Potentially.
The main reason the stock took such a big hit a few years ago is that the company was under investigation by the Financial Conduct Authority (FCA) for its fee structure (which was complex and high). However, it has recently been rolling out a new charging structure that’s designed to be more attractive (transparent and fair) to clients.
The company has also initiated a major cost savings drive. In July, it outlined a six-year plan to slash spend and achieve cumulative savings of close to £500m by 2030. These savings should help to boost earnings per share over time.
Meanwhile, recent updates from the company have been quite encouraging. For example, in January, the firm reported better-than-expected managed funds for 2024, driven by £4.3bn of yearly net inflows and high client engagement, a 95% retention rate.
As a result of all these positive developments, many brokers have been lifting their share price target for the stock. For instance, in February, analysts at Citigroup raised their target price from 1,010p to 1,280p, about 28% above the current share price.
Worth buying?
Is the stock worth considering then? I think so.
In the long run, I see plenty of growth potential here. I expect the wealth management industry to get bigger in the years ahead as people struggle with the complexities of the financial landscape and I reckon St. James’s Place will benefit.
As for the valuation, it looks attractive to me. Currently, the forward-looking price-to-earnings (P/E) ratio here is only 14.6.
Of course, there are plenty of risks to consider with this stock. Further regulatory intervention, a downturn in global financial markets, and a shift away from financial advisers are some examples.
All things considered, however, I like the look of this Footsie stock today.
