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For years, US tech success stories have hogged the limelight, captivating investors with their superior earnings and exciting growth stories. But investors may be overlooking how technological success is powering rising earnings at companies across the stock market from pharma and biotech to defence and tech solutions specialists.
UK-based Halma, a group of about 50 separate businesses each with technological prowess of one type or another, is a case in point. While some of the companies it has acquired for development offer tech-based solutions to challenges such as preventing fires in buildings under construction, others are immersed in technologies of the future, such as photonics. This involves the generation and transmission of light used in quantum computing. It is also used to boost AI and machine learning and create LED and video displays.
One photonics firm under Halma’s umbrella is driving exceptionally strong growth. Halma chief executive Marc Ronchetti noted that when it acquired the business a number of years ago, the high quality and expertise of its team stood out. Today, that single business is generating almost a fifth of the company’s entire revenues.
The order book at Oxford Instruments, which develops and manufactures products such as atomic force microscopes and quantum sensors to assist with scientific research, is another beneficiary of strong demand for its own advanced solutions and services. The company has invested heavily in its advanced technology division, which houses its semiconductor and quantum applications, and reports strong momentum in orders and revenues driven by US and European commercial customers.
Yet, despite having innovative technology solutions at the core of their businesses, few of these UK companies attract the premium valuations common among even small US tech stocks. In fact, Spectris, another London-listed high tech group, producing software-powered instruments, which once proposed a takeover of Oxford Instruments, is now in the process of being taken private by US buyout group KKR following a bidding war.
BUY: Halma (HLMA)
A second guidance upgrade in 2025 for Halma after a strong set of half-year results sent the company’s shares 14 per cent higher, writes Michael Fahy.
The maker of products for the safety, environmental and healthcare markets reported a 17 per cent rise in organic revenue for the period, and a 27 per cent rise in adjusted operating profit, well above consensus forecasts.
Around half of its top-line increase came from strong demand for photonics products by a “hyperscaler” company building data centres. It now accounts for 19 per cent of Halma’s turnover.
An inventory build to serve this growth meant the group’s cash conversion dipped to 79 per cent, but chief financial officer Carole Cran expects this ratio to return to its target level of 90 per cent by the year end.
Halma’s shares trade at 35 times earnings, against a 10-year average of 30 times. But a share that has generated returns three times greater than the FTSE 100 over the past decade doesn’t come cheap. It would seem foolish to bet against its continued outperformance.
BUY: easyJet (EZY)
There were signs in easyJet’s results that travellers are somewhat more cautious than they have been, writes Michael Fahy. Revenue per available seat kilometre fell by 3 per cent over the year, while the company increased capacity by 4 per cent.
Yet a 10 per cent increase in pre-tax profit showed the company made progress towards its medium-term target of generating a £1bn pre-tax profit, due largely to the continued strength of its package holidays arm.
EasyJet plans seat capacity growth of 3 per cent this year, as it takes delivery of 17 new Airbus A320 aircraft and retires three. This will increase the fleet to 370 aircraft, but gross capex is forecast to increase by more than 30 per cent to £1.7bn.
Brokers cut current-year forecasts, assuming that easyJet will lose more money this winter than last year and the shares fell by 2 per cent. However, Panmure Liberum forecast an earnings per share rise of 4 per cent. With shares down 16 per cent year-to-date and having not really gone anywhere in the recent years, we think a price/earnings ratio of 6.5 is too cheap.
HOLD: Renew Holdings (RNWH)
The engineering services provider, which focuses on renewing and maintaining critical infrastructure reported adjusted operating profit of £72.1mn on revenues of £1.12bn for its 2025 financial year, writes Hugh Moorhead.
These were up 2 per cent and 6 per cent, respectively, versus the previous year.
This performance has driven the shares back above January levels, when the company issued a profit warning due to lacklustre performance in its rail division (40 per cent of revenues).
Growth opportunities exist in several of Renew’s other businesses, including water services, nuclear, and grid transmission and distribution.
Renew will continue to prioritise earnings-accretive acquisitions ahead of shareholder distributions, while also aiming to pay a progressive dividend. Its full-year dividend of 20p was up by 5 per cent and implies a 2 per cent yield. The shares’ valuation, at 13 times consensus analysts’ 2026 earnings expectations, currently looks full but becomes attractive below 12 times.
