£10,000 invested in Raspberry Pi shares 1 year ago are now worth…
The Raspberry Pi (LSE:RPI) share price is up 9.2% over the past 12 months. That may disappoint some investors. It means that £10,000 invested just after the IPO (initial public offering) would now be worth £10,900.
Where could it go from here? Well, sadly I think it may be trading at fair value. Here’s why.
The valuation is a little problematic
The company is forecast to deliver strong earnings growth, with net income expected to rise from $20.02m in 2025 to $26.09m in 2026 and $33.15m in 2027. This translates to annual earnings growth rates of approximately 30.3% for 2025–2026 and 27.1% for 2026–2027, with an average annual growth rate of about 28.7% over the period.
The price-to-earnings (P/E) ratio, while falling rapidly as earnings catch up to the company’s valuation, remains elevated. The P/E sits at 57.4 times in 2025, 43.7 times in 2026, and 34.6 times in 2027. Despite the high multiples, the company’s growth profile is notably above the sector average, justifying some premium but also highlighting the risk if growth expectations falter.
Cash-adjusted metrics
On to the balance sheet. Raspberry Pi’s has a significant net cash position. It sits at $43.19m in 2025, $58.66m in 2026, and $88.3m in 2027. This strong cash position provides financial flexibility and reduces risk, supporting continued investment in innovation and expansion.
Looking at the enterprise-value-to-EBITDA (earnings before interest, tax, depreciation, and amortisation) ratio, another key valuation metric, the company is expected to trade at 26.4 times in 2025, 20.9 times in 2026, and 16.5 times in 2027. These figures, while still high, are consistent with fast-growing technology firms and should trend downward as earnings expand.
To assess whether the price of Raspberry Pi’s shares is justified by their growth, we can use a forward P/E-to-growth (PEG) ratio (P/E divided by average annual EPS growth rate). Using the average P/E for 2025–2027 (45.2x) and the average annual EPS growth rate (about 28.7%), the forward PEG ratio is approximately 1.58.
This is above the classic fair value benchmark of one, indicating the shares are expensive relative to their growth, but not excessively so for a tech stock. If we were to factor in net cash, that figure would become slightly more appealing.
The bottom line
Personally, I believe Raspberry Pi is quite richly valued. And that’s because of the quantitive data above, but also the fact that it operates in a sector with relatively low barriers to entry. The single-board computer market is accessible to start-ups, with minimal capital requirements and open-source designs widely available. While regulatory compliance and brand loyalty offer some protection, competitors can quickly replicate core products, intensifying market rivalry.
It is this lack of a moat that concerns me. However, analysts are still getting to know Raspberry Pi, and if it starts outperforming the consensus, it could certainly push higher. It’s worth considering, but probably not worth the risk for me.
The post £10,000 invested in Raspberry Pi shares 1 year ago are now worth… appeared first on The Motley Fool UK.
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James Fox has no position in any of the shares mentioned. The Motley Fool UK has recommended Raspberry Pi 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.
