Why’s Spirax Group a top-performing FTSE 100 stock this year?

While US markets shudder in the wake of Chinese artificial intelligence (AI) competitor DeepSeek, the FTSE 100‘s holding up well. The UK’s leading index climbed 70 points as the week began, edging ever closer to a new high above 8572.

An unlikely stock leading the charge on Tuesday (18 January) was steam management company Spirax Group (LSE: SPX). It’s up 16% year-to-date (YTD), making it one of the top Footsie stocks this month.

Formerly Spirax-Sarco Engineering, the British manufacturer designs and builds sustainable industrial solutions used in thermal energy and fluid technology. It’s comprised of three divisions: Steam Thermal Solutions, Electric Thermal Solutions, and Watson-Marlow Fluid Technology Solutions.

I don’t know much about steam and fluid energy but Spirax is far from some antiquated boiler maker. In fact, it’s a UK leader in industrial decarbonisation. According to the company, it’s “positioned to play a critical role in enabling the industrial transition to net zero”.

But that alone’s surely not the reason for this month’s rapid gains. So I decided to take a closer look.

Why the price surge?

Typically when a stock surges I check two things. Did it post a trading update, or has it been tipped by a broker?

Spirax’s most recent results were posted in November so that’s not it. But major broker Jefferies put in a Buy rating on the stock on 20 January. It’s climbed 7% since, but was already up almost 9% year-to-date at the time.

So what prompted the positive rating? Discussing the rating, Jefferies felt negative sentiment regarding the stock was overblown. It said “a number of the group’s recent issues are not yet fully resolved” but it expects a recovery in the next two-to-three years.

Before this year’s recovery, the stock price had slipped 60% from a five-year high of £170.45 in late 2021. It started this year around £68.50 but is now nearing £80. The reasons for the earlier decline aren’t clear but are likely due to a global industrial slowdown and uncertainty regarding the company’s valuation.

Addressing the issues, Spirax updated its name in early 2024 and then brought on a new CFO Louisa Burdett in July. It also launched a sustainability strategy dubbed ‘One Planet: Engineering with Purpose’.

Worth considering?

While the recent gains are impressive, I see little evidence to suggest a definitive turnaround. The stock enjoyed a similar recovery in late 2023, only to dip again just as quickly in the following quarter.

For investors looking for growth stocks on the FTSE 100, I think the following three look more promising to consider.

IT services provider Computacenter jumped 7.2% yesterday (27 January) after releasing record-breaking results for the second half of 2024. Jefferies put in a Buy rating on the stock and analysts expect on average a 25.7% gain in the coming 12 months.

Burberry‘s been blowing up the news lately after the famous luxury fashion house posted higher-than-expected sales for Q3 2024. The stock surged 16% last week, bringing the price to a six-month high. 

Airtel Africa, with results out this week, could make a surprise recovery this year. After selling off non-core assets, it aims to refocus on core markets and reignite growth.

The post Why’s Spirax Group a top-performing FTSE 100 stock this year? appeared first on The Motley Fool UK.

More reading

• Down 33% in 2024 — can the UK’s 2 worst blue-chips smash the stock market this year?

Mark Hartley has positions in Airtel Africa Plc. The Motley Fool UK has recommended Airtel Africa Plc, Burberry Group Plc, and Computacenter Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

See author's posts