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The FTSE 250 index has been a bit flat so far in 2025. However, that doesn’t mean its constituent businesses haven’t been making good progress. And Deutsche Bank has spotted one company it believes is primed to surge. So much so that earlier in the year its team of analysts issued a Buy recommendation with a share price target that suggests a 60% gain is potentially on the horizon for fast-acting investors.
Investigating the opportunity
The FTSE 250 stock in question is Victrex (LSE:VCT). And over the last five years, the stock’s hardly been a money maker for shareholders, given its market-cap has been more than slashed in half. But that doesn’t mean it still can’t be a lucrative investment today. After all, a successful turnaround by management could deliver substantial recovery gains.
That certainly seems to be what Deutsche’s betting on. To be fair, there are early signs a recovery’s underway. Industrial demand for the firm’s unique PEEK polymers is back on the rise, with inventory-destocking headwinds steadily coming to an end.
Subsequently, production volumes have been restored to 2022 levels. And at the same time, operating optimisations and efficiencies have paved the way for superior free cash flow generation, while revenue growth has returned, albeit by a small amount.
Needless to say, that’s a welcome change of pace compared to the lacklustre results the company has been delivering in recent years. This likely also explains why other analysts have begun reassessing their recommendations to be more bullish.
Taking a step back
Getting in early before a stock recovery kicks off can be very lucrative, paving the way for substantial double-digit gains. However, that also comes with risk if the underlying business can’t keep up with expectations. In the case of Victrex, the company isn’t out of the woods quite yet.
Its highly-anticipated China production facility was recently completed, expanding the firm’s reach into Asian markets. But so far, manufacturing challenges have prevented it from operating at full capacity. Consequently, management’s production forecast for its 2025 fiscal year (ending in September) was slashed from up to 200 polymer tonnes to just 50 tonnes.
Furthermore, with lower-margin valued added reseller customers driving the bulk of new demand, profits have yet to move back in the right direction. And with concerns that further challenges may lie ahead, the analyst team at Jefferies has changed its recommendation from Hold to Underperform.
In other words, not every institutional analyst is convinced Victrex is on the verge of a rebound.
The bottom line
Conflicting opinions among analysts is nothing new in the stock market. However, in the case of Victrex, I think some healthy scepticism is warranted. The firm’s track record of hitting targets has been a bit patchy of late. And if that pattern continues moving forward, the FTSE 250 stock’s recovery may not be as close as some analysts believe. With that in mind, I’m keeping this business on my watchlist for now.
