A 670% return over the last 10 years, makes 3i (LSE:III) one of the UK’s top-performing stocks. The share price crashed after its update three months ago, but things look like they’re back on track.
The company’s long-term competitive advantage is still firmly intact. So with growth starting to come back, could the stock be set to outperform the FTSE 100 again over the next decade?
Company overview
3i is a private equity company with an extremely top-heavy portfolio. Its largest investment – its stake in a European retailer called Action – accounts for around 74% of its total portfolio.
As a result, the FTSE 100 firm’s share price often moves in response to how Action performs. A key measure of this is like-for-like (LFL) sales growth, which is what investors typically pay attention to.
Action has been growing by opening new stores recently and it probably still has a long way to go on this front. But LFL sales increases arguably provide a better guide to long-term growth.
Coming out of the Covid-19 pandemic, the firm had consistently achieved LFL growth of above 10%. But this fell to 6.3% during the first nine months of 2025 and that’s where we pick up the story.
The latest results
The latest news is that things actually got worse at Action in the last few months of 2025, with LFL growth coming in at 4.9% for 2025. They are, however, showing signs of recovery.
During the first four weeks of January, LFL sales growth improved to 6.1%. And 3i pointed out that the decline has largely been the result of relatively weak consumer spending in France.
Regardless of where the growth comes from, it was enough to bump up the firm’s net asset value (NAV) by 5.5% since September. And there were good results elsewhere as well.
Investors are focusing on the positives from the latest report. But while I think these are real, I was surprised to see the stock climb 10% in response to the update on Thursday (29 January).
Investment equation
3i shares currently trade at a price-to-book (P/B) multiple of 1.2, which implies a slight premium to the marked value of its portfolio. But investors need to think about whether or not that’s justified.
The firm values its stake in Action at an EBITDA multiple of 18.5, which is very high for a retailer. And this increases to over 22 when factoring in the premium to book value built into 3i shares.
The business probably has some of the best growth prospects in the sector. But while 6.1% LFL sales growth is better than any UK retailers I can think of, it’s still lower than it was.
A weak performance in France highlights the potential impact of a downturn in consumer spending. So predicting where the share price might go next isn’t easy by any means.
Long-term investing
3i’s strength comes from the fact that it invests its own capital, instead of raising cash from external sources. That sets it apart from private equity firms that have to operate on specific timescales.
This advantage is firmly intact. And with Action still having a lot of scope for new store openings, I think the stock is well worth considering right now, despite the recent jump in the share price.
