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All eyes are on Rolls-Royce shares right now. That’s because they’ve delivered monster returns over the last three years. Looking ahead, however, other shares could potentially deliver higher returns. Here’s a look at a £2 UK stock that City analysts believe will trounce Rolls-Rolls over the next year or so.
A hidden gem?
The UK stock market is full of under-the-radar companies that not many people have heard of. Boku (LSE: BOKU) is a great example.
Listed on the UK’s Alternative Investment Market (AIM), it’s a technology company that specialises in mobile payment solutions. It currently trades for 225p and sports a market cap of £670m.
Now, the interesting thing is, City analysts’ average 12-month price target for this stock is 293p. That’s about 29% above the current share price.
This indicates that analysts see the potential for significant gains from here. Going back to Rolls-Royce, its average price target is about 10% below its current share price.
A lot to like
Taking a closer look at this company, I can see why analysts like it.
For starters, it operates in a rapidly-growing industry. According to Grand View Research, the mobile payments market is forecast to grow by 38% per year between now and 2030. That’s a phenomenal level of growth. And it could provide massive growth support for Boku, which helps consumers pay for services from their smartphones without the need for a debit or credit card. It counts companies like Amazon, Spotify, and Google as customers.
Secondly, this company – which is very scalable – has a brilliant growth track record. Over the last three years, revenue has soared from $62m to $99m. Note that this year, analysts forecast revenue of $124m. For 2026, the forecast is $149m.
Boku is also profitable and cash generative. Additionally, it has a strong balance sheet and is doing share buybacks, so the financials look great.
Finally, the stock is in a beautiful uptrend. Recently, it has hit new all-time highs, which is a major positive as it means that there are now no disgruntled investors who are sitting on losses and waiting to break even and then sell.
Risks to think about
Now, it’s not bullet-proof, of course. As with every stock, there are risks here.
One thing to be aware of is that digital payments is a fiercely competitive industry. And Boku is up against some big players including Apple and PayPal, so competition from rivals is a risk.
Another risk is a major economic slowdown. This could lead to a slowdown in market growth as consumers rein in their spending.
It’s also worth mentioning the stock’s valuation. Currently, Boku trades at 29 times next year’s earnings forecast – that doesn’t leave much room for a setback.
Overall though, I share City analysts’ bullish view here. I think this UK stock is worth considering today.
