Putting money to work in the stock market is one of the most accessible routes to building long-term wealth. And for investors with £5,000 to deploy today, the next 12 months could deliver a very pleasant surprise.
So how much money should investors expect to make?
What an index fund could deliver
The FTSE 100‘s currently forecast to deliver around 10% in price gains over the next 12 months, according to the average institutional analyst consensus. Pair that with a 3% dividend yield, and a £5,000 investment today could grow to roughly £5,650 by July 2027.
But what about stock-pickers? Obviously, the answer here depends on which stocks investors decide to buy. But looking at Kainos Group (LSE:KNOS), the potential rewards could be far more substantial if the latest projections prove accurate.
Could Kainos do even better?
As a quick introduction, Kainos is a technology company operating across three divisions:
- Digital Services – builds digital transformation platforms for public sector and healthcare clients.
- Workday Services – provides deployment and consulting services for Workday‘s enterprise software.
- Workday Products – its own suite of Software as a Service (SaaS) applications that sit on top of the Workday platform.
With an analyst consensus price target of 1,110p against today’s price of around 782p, meaning the stock could climb 42% over the next 12 months. That’s almost four times what index investors are expected to earn. And it’s enough to turn £5,000 into potentially £7,100 even before counting dividends!
So what’s behind this bullish sentiment?
The bull versus bear case
The group’s latest full-year results make a compelling case for why analysts are so optimistic. Between April 2025 and this March, revenue grew 17% to £431.1m, pre-tax profits rose 19% to £58.1m, and bookings surged 32% to £505.3m.
Healthcare revenue within Digital Services was particularly impressive, jumping 55% as NHS contract wins accelerated. And with a contracted backlog of £433.9m at the start of April, provides management with excellent visibility as Kainos enters its 2027 fiscal year.
But the most exciting part of the story is Workday Products. This SaaS division now has nearly 700 customers, with annual recurring revenue (ARR) of £89m. And with its latest Pay Transparency software package proving impressively popular, the company remains firmly on track to reach its £200m ARR target by 2030.
Having said that, there are risks worth considering carefully. Underlying margins slipped from 18% to 16% in the year, driven by a significant rise in contractor costs as Kainos scrambled to meet the pace of new contract wins.
While management expects margins to recover as contractors are replaced by permanent staff, this transition takes time. And if bookings growth were to slow before that margin recovery materialises, the fundamentals could come under pressure.
So is it worth buying?
Kainos is a bit of a rare thing in the current stock market, in my opinion. It’s a profitable, cash-generative tech enterprise gaining serious momentum. And yet the share price has largely lagged.
With a forward price-to-earnings ratio of 16.2, the valuation, while not dirt cheap, isn’t all that demanding given the underlying quality of this business. That’s why I’ve already added the shares to my own portfolio.
But it’s not the only stock that’s caught my eye this week…
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Zaven Boyrazian owns shares in Kainos Group.
