A modest £5,000 investment in health and safety technology specialist Halma (LSE: HLMA) 20 years ago is worth a stunning £170,000 today, Rathbones says. It called the FTSE 100 stock a “boring” but brilliant share. There’s nothing boring about the last week though. The Halma share price just plunged. Why?
I’ve been hungry to add Halma to my Stocks and Shares ISA for years. It’s increased profits for 22 years in a row and at a decent lick too, as this quick run-through shows:
- 2026 – £585m
- 2025 – £459m
- 2024 – £396m
- 2023 – £361m
- 2022 – £331m
Its dividend track record is even better, although you might not think so given the tiny trailing yield of 0.59%. The reason it’s so highly rated for income is that the board has increased dividends for 45 years in a row. That suggests management is really on top of things. Dividend growth has been generous too. Over the last 15 years, shareholder payouts grew at an average annual compound rate of 6.89%.
So why did Halma shares plunge?
The yield is only low because the shares have done so well. At least, they were doing well, until Thursday (11 June), when they suddenly plunged 14%. They’re down more than 16% over the last week. What’s gone wrong?
If you’re expecting something nasty like a profit warning, forget it. Full-year 2026 results showed organic revenue growth of 16.6% a year. Its photonics division delivered 52% growth, boosted by demand from AI data centres. So how come the shares didn’t jump?
Investors are worried that photonics demand hails from a single data centre company, which now makes up 20% of the company’s entire revenue. Also, that growth is forecast to slow to 30% next year. Growth in Halma’s other divisions was steady, but unexciting.
There’s another issue. Halma has grown into a £15bn company through acquisitions. But activity has slowed lately, and investors are looking for it to pick up the pace.
And here’s another reason for the sell-off. When I last wrote about Halma for The Twelfth Magpie on 15 May, the price-to-earnings ratio was sky-high at 49. At that valuation, one bad acquisition, weaker growth or a broader stock market sell-off could hit the shares hard.
Is this a FTSE 100 buying opportunity?
I should have added that one poor set of results would also be an issue. Except they weren’t poor. Just mildly concerning. But that’s what happens when a stock is priced for perfection. The slump is the type of opportunity that may not come along for years. Should I take it?
Halma is cheaper today, but not exactly a bargain with a P/E of 34.4. That’s still way above the FTSE 100 average of 16. Having said that, this is an above average stock.
I’m worried by that P/E, and the forecast slowdown in data centre demand. I think Halma is worth considering, and I’ll be watching its progress like a hawk. But I won’t buy it today.
Should you invest £5,000 in Halma Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Halma Plc made the list?
Harvey Jones does not hold any positions in the companies mentioned.
