Diploma’s share price appears to have hit a high. What can we expect in 2025 and beyond?

I A diploma (LSE: DPLM) share price is forecast to grow by just 1.79% over the next 12 months as analysts’ pricing weakens.

A few weeks back the price fell by 9% after it posted its full year 2024 results. Despite a 14% increase in profits and a 15% increase in earnings, performance fell short of shareholder expectations.

Diploma has enjoyed earnings per share (EPS) growth of 25% year-on-year from 2021. This year it was only 3.63%. Revenue growth has also been slowing over the past four years, falling from 46% in 2021.

The underperformance comes after the share price has risen 135% over the past five years and 32% this year alone. But after peaking at £46.32 in mid-September, growth has slowed. Granted, it recovered quickly from last month’s dip but little has been done since then.

Good thing it increased its final dividend to 42p per share. But compared to a share price of £45, it should not be mentioned, which equates to a yield of just 1.32%.

So why am I still optimistic about the stock?

Strong security assurance

Diploma is one of my favorite defensive stocks, despite not being considered in that category. Although it experiences occasional fluctuations during difficult times, it is remarkably resilient. That makes it a good option if you aim not only for long-term growth but also for stability.

And it has a history of growth.

The price has increased by almost 5,200% in the last 30 years, representing an annual growth rate of 14.15% per year.

What makes it interesting is the diversity of sectors and industries he works in.

As an industrial group based in the UK, it provides specialized technology products and services across three main sectors: Health Sciences, Symptoms, and Control. It also operates globally, including in North America and Continental Europe, serving industries such as healthcare, laboratory research, and industrial engineering.

Its competitors are different, each operating in their own industry, such as Howden Joinery, Dechra Pharmaceuticals again Halma. Buying smaller competitors is how Diploma grows but this presents risks. If it overpays on receivables or defaults, it may lose money.

Measurement

The stock seems overvalued right now, with a trailing price-to-earnings (P/E) ratio of 47.6. Since revenue is forecast to rise by 39%, this could drop to 36.2. However, that would still be above the industry average of 14.

This may be one of the reasons why analysts do not expect the growth of previous years to continue. The average 12-month price target is around £47 – hardly a bargain at today’s price.

I’ll admit, it’s a disappointing forecast, as the stock has done very well so far. However, I remain optimistic about its long-term potential and defensive capabilities. It operates in a niche market, offering a variety of products with varying levels of demand.

As part of a long-term portfolio aimed at retirement, I will continue to hold my Diploma shares but do not plan to buy any more today. However, I expect it to resume the strong growth it is known for in 2026 and beyond.