Prediction: this UK tech stock will outperform Lloyds shares over the next 5 years
Lloyds (LSE: LLOY) shares have performed really well recently. Over the last year, they’ve climbed from 47p to 72p – a gain of 53%.
Looking ahead, the shares could continue to deliver positive returns for investors. However, over the next five years, I think there will be plenty of UK stocks that deliver higher returns.
Strong momentum
Lloyds shares have several things going for them right now (so they could still be worth considering).
For starters, profits are expected to rise in the years ahead. For 2025 and 2026, City analysts are expecting earnings per share of 7.1p and 9.1p, respectively, versus 6.3p for 2024.
Secondly, the dividend is growing. Recently, Lloyds declared total dividends of 3.17p for 2024 – an increase of 15% year on year. That payout translates to a yield of about 4.4% at the current share price. That’s a higher yield than most savings accounts are offering.
Third, the company is buying back its own shares. Recently, the bank announced a £1.7bn buyback (which should help to boost earnings per share).
Finally, the shares are in a strong uptrend. And trends can last for a while.
However, despite all of the above, I’m not convinced that Lloyds shares can deliver big returns over the next five years. The main reason for this is that the bank’s fortunes are closely tied to the strength of the UK economy.
I just don’t see the UK economy firing over the next five years (it could even be quite weak). And I think a lack of economic growth may hold Lloyds shares back.
Outperformance potential
One UK stock that I believe is likely to outperform Lloyds over the next five is Wise (LSE: WISE). It’s a leading financial technology (FinTech) company that specialises in international money transfers.
This company operates globally (70+ countries worldwide) today, so it’s not dependent on the UK economy like Lloyds is. That’s one reason I see outperformance potential here.
Another reason is that Wise is far more scalable than Lloyds. Lloyds’ growth potential is quite limited due to the fact that it’s a UK-focused bank. With Wise, however, the growth potential is essentially limitless. That’s because it’s a global company with the ability to continually roll out new products and services for its customers.
One other factor that could potentially help this stock outperform Lloyds is the global shift away from traditional banking services (like Lloyds offers) towards fintech services such as electronic payments and mobile payments. Given this shift, Wise could potentially even capture market share from Lloyds (its international payments services are very uncompetitive today).
Now, competition from other fintech companies could result in my prediction missing the mark. As could valuation compression (the company’s price-to-earnings (P/E) ratio is about 28 today, which is quite high).
Taking a five-year view, however, I’m quite optimistic about the stock’s prospects. I think this fintech stock is worth considering today.
The post Prediction: this UK tech stock will outperform Lloyds shares over the next 5 years appeared first on The Motley Fool UK.
But here’s another bargain investment that looks absurdly dirt-cheap:
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- How do Lloyds shares measure up as a GARP investment?
- £10,000 invested in Lloyds shares at the start of this year is now worth…
- £10,000 invested in Lloyds shares 20 years ago is now worth…
- The Lloyds share price is already up 24% in 2025! Can it hit £1?
- As Lloyds shares creep back above book value, have I missed my chance to buy?
Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc and Wise 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.
