When assessing stocks, long-term investors like myself often utilise key metrics such as the price-to-earnings (P/E) ratio, dividend yield, and measures of profitability like return on capital employed (ROCE) or return on equity (ROE). These indicators help assess whether a share is attractively priced and capable of delivering strong returns over time. 

With the FTSE 100 edging towards all-time highs, I’ve uncovered three lesser-known shares outside the index that I think are worth considering this summer. They each have a combination of financial metrics that I think make them key contenders for growth in 2025.

The recovering publisher

Bloomsbury Publishing (LSE: BMY) is a mid-sized publishing house famous for the Harry Potter series, among others. It enjoyed a spectacular rally following the pandemic and now, after a brief dip, looks to be resuming. With a modest market-cap of £506m and a reasonable P/E ratio of 13.89, the shares aren’t overly expensive.

Yet despite a strong niche, its fortunes remain tied to unpredictable publishing trends and consumer demand. A slowdown in book sales, especially in academic or trade titles, could hit revenues. Additionally, inflationary pressures on printing and distribution costs may squeeze margins, while reliance on a few major titles poses concentration risks.

Still, its financials are looking good. Its 2.4% dividend yield’s modest but sustainable, while a standout ROCE of 23.5% suggests efficient capital use. These solid fundamentals, combined with a niche dominance in academic and fantasy publishing, could support further growth in 2025.

The pensions specialist

XPS Pensions Group (LSE: XPS) specialises in pension consultancy and actuarial services, boasting a moderate £834m market cap and a favourable P/E ratio of 14.43. Its dividend yield of 2.65% adds steady income, but the highlight is a remarkable ROE of 38.12%, signalling exceptional profitability and shareholder value creation.

It’s worth noting that it operates in a heavily regulated sector, and changes to pension legislation or funding rules could impact demand for its services. The high ROE may not be sustainable if growth slows or margins contract. Furthermore, competition from larger financial firms and automated pension platforms could threaten future profitability.

But considering the persistent demand for retirement planning, I think it has promising growth potential. I mean, it’s already up 237.5% in the past five years, equating to annualised growth of 27.5% a year!

The online trading giant

A heavyweight in financial derivatives and trading platforms, IG Group (LSE: IGG) commands a vast £19.27bn market-cap. A staggering net margin of 35.31% highlights the company’s exceptional operational efficiency. 

Yet despite strong margins, it faces regulatory scrutiny across multiple jurisdictions, which could restrict product offerings or increase compliance costs. Revenue’s also highly sensitive to market activity — a prolonged period of low volatility or reduced client trading could lead to earnings pressure. Cybersecurity risks and reputational exposure in the trading sector also remain material concerns.

What I like is the low P/E of 11.61, which suggests the shares may be undervalued, especially considering a generous 4.17% dividend yield. And if market volatility persists, it could benefit from increased trading activity and strong earnings growth.

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I often find when times are tough, the little guys come out of the woodwork and start to shine.

Here are two that I think could enjoy decent growth in the coming years — if the economy plays ball!

Trainline

Trainline (LSE: TRN) is a digital ticket booking service that’s gone from strength to strength recently. The share price has surged an impressive 41.5% over the past year. Not bad for what is essentially a train and coach comparison site, helping users find the most cost-effective or time-efficient journey anywhere in the EU. 

I remember when it was just a small UK train booking site called thetrainline.com. It rebranded to just Trainline in 2016 before expanding across Europe and going public in 2019. Things were a bit rocky at first but in recent years it seems to have found its feet (or rails).

The company now sports a meaty £1.85bn market cap and revenue of £114.5m as of August this year. It has a strong net profit margin of 14.8% and earnings per share (EPS) that climbed 300% year on year.

On the downside, the high price means it also has a high price-to-earnings (P/E) ratio of 32.8 — far ahead of the industry average of 22.8. That makes further growth less likely. Other risks that threaten profits include travel restrictions and competitor apps, particularly from low-cost alternatives like budget airlines. On average, train travel remains relatively expensive compared to short-haul flights.

Still, recent performance suggests it must be doing something right, so it’s firmly on my list of ISA options for 2025.

XPS Pensions Group

XPS Pensions Group (LSE: XPS) is a British pension consultancy firm providing a variety of services focused on pensions, investment consulting and administration.

The main reason I like it is the slow but stable growth. I’m a big fan of investments I can forget about for years without worry. Plus it has a 2.8% yield — although it only recently started paying dividends so reliability isn’t certain yet. 

The second reason I like it is the solid balance sheet, with low debt and sufficient interest coverage. It has a high net profit margin of 27.2% and a high return on equity (ROE) of 29.1%. Plus, at 14.5, its P/E ratio has been reducing for some time.

However, one recent development concerns me. The co-CEO and Director Ben Bramhall recently sold 51% of his shares at slightly below the current price. It’s impossible to say exactly why — maybe he needed the money — but it’s a risk nonetheless. If an insider sells, we have to wonder if they know something we don’t!

Looking ahead, revenue is forecast to grow by 12% in the next year while earnings are forecast to decline by around 10%. This won’t necessarily affect the share price but it could limit growth.

With steady growth and a good dividend yield, I’m happy to put it on my list of potential ISA additions for next year.

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XPS Pensions Group (LSE:XPS) is a new addition to the FTSE 250, having joined the index a couple of months ago. But investors who knew about it in 2019 could have done incredibly well.

Over the last five years, the stock has gone from £1.18 per share to £3.60. And with the company still posting impressive results, there could well be more to come. 

What does the company do?

As its name suggests, XPS specialises in pensions consulting. This includes helping companies stay ahead of changes in regulation as well as providing investment advice. 

It’s very much the opposite of semiconductor design. But it’s an important industry that requires specialist understanding and the need for this is unlikely to go away any time soon.

Five years ago, £10,000 would have bought me 8,474 shares in the company. At today’s prices, that would have a market value of £30,508. 

In that time, revenues have almost doubled, but wider operating margin means profits have grown much faster. So I think this is definitely worth a closer look.

A people business

With consultancy companies, their people are their most important asset. There are advantages to this, but there are also drawbacks. 

On the positive side, XPS doesn’t have much in the way of machinery or equipment. That’s a positive – those things need maintenance and repair in ways that people don’t.

The downside is people can go off and set up rival operations in ways that machines can’t. To limit that risk, firms need to keep paying their staff well – but that’s expensive for shareholders.

XPS has been doing this by paying employees using equity. But that has caused the share count to more than double since 2016, diluting the value of each share outstanding by around 56%. 

Is it worth it?

Issuing additional shares is how XPS invests in itself, but the big question is whether or not the company gets a good return on that investment. And the recent evidence is encouraging.

Over the last five years, operating profits have increased by 250%, while the share count has grown by 2.5%. The additional profits have clearly been worth the dilution.

Factoring in the increase in the number of shares outstanding, operating profits have grown at almost 15% per year since 2019. By any standards, that’s a strong result.

Investors will want to make sure the increases keep coming – if the growth rate slows, the equation becomes much less attractive. But I think it has been a clear success recently.

A stock to consider buying

The risk of the XPS Pension Group’s staff using their industry knowledge to set up a rival firm can’t be ignored. But the company has strong customer relationships that help limit this.

I think the stock is one investors should consider. If profit growth can keep outpacing the increase in shares outstanding, shareholders should continue to benefit as a result.

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Past performance is no guide to the future, especially over the short term. So I’m approaching Moonpig Group (LSE: MOON) with caution. Its shares have rebounded 24.94% in the last month. That’s a fabulous result, but all that matters today is where they go next.

Growth opportunities

The Moonpig share price is up 20.55% over one year, but that follows a rocky ride for the online greetings card supplier whose shares plunged by two-thirds after listing in February 2021.

The mood changed on 28 June when it posted a 6.6% increase in full-year revenues to £341.1m, with pre-tax profits up nearly 33% to £46.4m. Its subscription service Moonpig Plus, which offers discounted cards and perks for £9.99 annually, exceeded expectations with half a million members in a year.

Broker Berenberg has praised the group’s technology-led strategy and hiked its price target from 265p to 280p. Today, it trades at around 192p. That’s a potential rise of 38% from here. With consumers likely to start feeling better off, it could continue to grow. Trading at 14.72 times earnings, the stock isn’t expensive. I’m tempted to buy before more investors wake up to its recovery, but recent volatility makes me wary.

XPS Pensions Group (LSE: XPS) only joined the FTSE 250 last month but it’s going great guns, up 23.95% in a month. Over one year, it’s up a blockbuster 76.22%. It’s pricier than Moonpig, trading at 19.26 times earnings.

It’s also got a lift from a positive set of results, reporting on 20 June that group revenue jumped 21% last year to £196.6m.

XPS is the biggest pensions consultancy in Britain. It should benefit as the population gets older and starts worrying about retirement. In contrast to Moonpig, it pays dividends, with a current trailing yield of 3.07%. That’s pretty impressive, given its stellar share price growth. Better still, the board hiked last year’s payout by 19%.

Time to buy?

One risk is that it has grown quickly through acquisitions, which don’t always add value. They have so far, though. I like Moonpig, but I like XPS more.

Soft drinks firm Britvic (LSE: BVIC) was the FTSE 250’s third best performer over the last month, up 23.66%. A £3.1bn takeover proposal by Danish brewer Carlsberg has put some fizz into the stock, which has now climbed 42.02% over 12 months.

The board has so far rejected two proposals, one at 1,200p per share and another at 1,250p. Today, the shares trade at 1,216p.

Top Britvic shareholder Aviva reckons Carlsberg needs to go higher. It says it hasn’t factored in the anticipated improvement in Britvic’s finances. Today, the £2.98bn group trades at 19.84 times earnings.

Personally, I never buy on takeover talk. There is too much uncertainty, plus a risk the share price will flop if it falls through. XPS is firmly on my radar and I’ll look to buy once the excitement over its results ebbs. Then I’ll take a second look at Moonpig.

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A near-penny stock with HUGE dividends

There are a number of ways in which UK share investors can capitalise on the UK’s rapidly-growing elderly population. One way I’d do this is to buy XPS Pensions Group (LSE: XPS) which trades at 139p. The Office for National Statistics thinks one in four citizens will be aged 65 and above by 2050. That compares with one in five in 2019.

I expect XPS Pensions — the biggest pensions consultancy in Britain — to exploit this demographic opportunity to its fullest. I also like this particular company because of its commitment to expansion. In December, it agreed to acquire industry peer Michael J Fox for a fee of up to £3.75m.

I think XPS Pensions is an especially good buy because of its dividend prospects. Its defensive operations mean it should have the confidence and the financial clout to pay big dividends year after year. Indeed, its yield for the two financial years to March 2022 and 2023 sit at 4.8% and 5.2% respectively.

I’d buy the company even though its thirst for acquisitions could come back to bite it, for example if an asset throws up unexpected costs or delivers underwhelming revenues.

Building for growth

A worsening shortage of residential rental properties is encouraging me to invest in The PRS REIT (LSE: PRSR) too. Rents on family homes are booming as demand outstrips supply. In the last financial year (to June 2021) this UK share was able to increase rental rates on re-let properties by 6.2% and to existing tenants by 4%.

This massive market imbalance saw rents in the UK rise at their fastest rate since 2008 in the third quarter of last year, according to Zoopla. The property listings giant thinks tenant costs will continue rising strongly and has forecast average growth of 4.5% in 2022.

It’ll take a long time for this rapid uptrend to moderate, given the massive amount of residential properties required. And in the meantime, PRS is supercharging its own production plans to make the most of the opportunity.

In December, it acquired three of five targeted sites on which it plans to build 383 new units. The business recently hiked its portfolio target to 5,700 homes from 5,200 previously.

Now PRS doesn’t come cheap. At current prices of 106p, the property firm trades on a forward P/E ratio of 29.5 times. This sort of valuation could cause its share price to drop sharply if it encounters problems, for example if building material prices continue to soar.

However, I believe the bright market outlook makes this ‘almost’ penny stock worthy of a handsome premium like this. Besides, a meaty 3.8% dividend yield helps to take the edge off The PRS REIT’s elevated earnings multiple.

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Egypt is the continent’s third-biggest economy and is experiencing soaring demand for communications services. Telecom Egypt said last month that “the strong data momentum witnessed during the pandemic has persisted throughout 2021” and expects double-digit revenues growth in 2022. I was also impressed by forecasts that EBITDA margins are predicted to grow “in the mid to high thirties.”

Today, the Egyptian economy derives around a quarter of GDP from petroleum. Thus the steady transition from fossil fuels to greener sources could pose a significant indirect risk to Telecom Egypt. But I think progress elsewhere in the economy could offset this threat.

A top green penny stock

Supply chain issues are also causing huge problems in the construction industry. Costs are spiralling and developers are reappraising the economics of certain projects. Even if the will remains, huge raw material shortages are preventing building work from starting, or continuing in many cases.

In this environment, building products supplier Alumasc Group (LSE: ALU) faces a not-insignificant threat to profits in the short-to-medium term. However, I’m still considering adding this penny stock to my shares portfolio today.

Why? For one, through its Timloc brand it offers a broad range of construction products for the housebuilding sector. It’s therefore well-placed to exploit the housebuilding boom of the coming decade (the government aims to create 300,000 new homes a year by the mid-2020s).

Secondly, I like Alumasc’s focus on manufacturing sustainable building products, something that will stand it in good stead as governments and businesses aim to become greener. In the company’s words, most of its products “manage the scarce resources of water and energy in the built environment, and improve quality of life for the owner/occupier using recyclable materials.”

5.2% dividend yields!

XPS Pensions Group (LSE: XPS) is another cheap UK share on my radar today. This particular company is the largest pensions consultancy in the country. It therefore stands to make big profits as the local population rapidly ages (government statistics suggest one-in-seven people will be aged over 75 by 2040).

I also like XPS Pensions because it operates in a market which remains stable at all points of the economic cycle. This makes it a dependable bet for those seeking a steady flow of passive income. Incidentally, the yield here sits at an appetising 5.2% for this fiscal year.

I’d buy XPS Pensions despite the threats created by its acquisition-led growth strategy, which could lead to disappointing profits or unexpected costs on buying mis-steps. However, the business has had decent success on this front, although past performance is no reliable indicator of future performance.

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The prospect of temporary choppiness doesn’t put me off, though. This is because I buy UK shares with a view to holding them for the long haul. Let me present three top nearly penny stocks I’d buy right now to make robust long-term returns.

SaaS star

I think Tribal Group’s (LSE: TRB) recent transformation programme could reap terrific rewards in the years ahead. This low-cost UK share offers a range of software services that allow educational institutions to serve and communicate with their students more effectively. And recently the IT firm has switched to a “software as a service” (SaaS) model to boost recurring revenues and give earnings growth a shot in the arm.

The former penny stock has been active on the M&A front too and recently acquired scheduling-and-timetabling-solutions specialist Semestry. It also continues to invest heavily in its Edge cloud-based range of products and launched its Edge Admissions module last month. I think it’s a top buy despite the ever-present risk of systems failure and data loss. Such occurrences could cause significant reputational damage that might harm sales to existing and potential customers.

Another top nearly penny stock

Zoo Media Group’s (LSE: ZOO) a nearly penny stock I think will thrive in an increasingly digitalised world. This particular UK share offers cloud-based media services to movie studios, streaming services, and television producers. Not only is it benefiting from the huge investment streamers like Netflix are spending on their own content. Zoo Media is also enjoying soaring demand for its localisation services as content is beamed around the world and dubbing and subtitling is needed.

I’d buy this UK share even though its elevated valuation could cause a problem later on. Zoo Media’s forward price-to-earnings (P/E) ratio of 55 times might prompt a share price crash if news flow around the company starts to disappoint.

Pensions powerhouse

I think pensions consultancy and administrator XPS Pensions Group (LSE: XPS) is a cheap UK share that could thrive as the country’s population rapidly ages. Office for National Statistics data shows that the number of Brits aged between 65 and 84 rocketed 23% in the decade to 2018. It has been suggested that the over-65s could represent a quarter of the domestic population by 2050, too.

I also like this almost penny stock as its non-cyclical operations means it can pay big dividends during good times and bad. Incidentally its yield sits a shade below 5% for this fiscal year (to March 2022). I think XPS is a top buy despite the problems that its acquisition-based growth strategy could throw up. Such problems could include the business ultimately overpaying to build its position in its fragmented marketplace.

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Robust cash flow and dividends

The directors signalled a positive outlook and satisfaction with the outcome by raising the total shareholder dividend for the year by 2%. And XPS hasn’t missed any dividend payments because of the pandemic, suggesting a resilient underlying operation. In one indicator supporting that assumption, operating cash flow has been robust.

On top of that, XPS didn’t take up any of the Government Covid-19 support loans or furlough any of its staff. However, the company moved staff to home working at the start of the year and maintained “strong” client service through the challenges of the pandemic.

The directors said robust client demand across all pension divisions drove the year’s revenue growth. And much of the advance was organic in origin, helped by a regulatory tailwind. A new pensions bill and associated regulatory changes should continue to drive demand for the firm’s services, they think.

A “high proportion” of the company’s revenues are non-discretionary (that is, essential). And part of the strategy is to grow the services to existing clients following regulatory and market changes where clients need support.  So the current high level of regulatory change is one of the company’s opportunities.

Other routes to growth

XPS also aims to expand by gaining market share. And there’s a healthy pipeline of new business opportunities to pursue.

A third route to expansion via mergers and acquisitions is also a “core” part of the company’s strategy. XPS has executed three bolt-on acquisitions in recent years. And the directors reckon the company operates in a fragmented market ripe with further consolidation opportunities.

Overall, the outlook is positive. And the directors expect the business to deliver “at least” mid-single-digit percentage organic growth in revenues over the medium term. 

Meanwhile, with the share price near 138p, the forward-looking earnings multiple for the current trading year to March 2022 is just below 14. That’s set against analysts’ expectations for a mid-single-digit percentage increase in earnings. And the anticipated dividend yield is 5%.

I’d buy the stock for income from the stream of shareholder dividends and for steady growth from the business and the share price. However, with its market capitalisation near £284m, XPS is a small-cap company and smaller businesses can suffer from volatility. It’s possible for analysts’ assumptions to prove incorrect and I could lose money on the shares. Indeed, the share price was once much higher than it is today.

Nevertheless, I’d embrace the risks and aim to hold the stock for the long term as part of a portfolio diversified between several companies and sectors.

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Passive income generator

I’ve held a stake in kettle safety control supplier Strix (LSE: KETL) for some time now. I see no reason for this to change following Wednesday’s encouraging update on trading over 2020.

Yesterday, Strix stated it had seen “a marked recovery” in demand from July to December. This performance should see it deliver “modest” profit growth for the period. That’s pretty encouraging considering just how awful 2020 was for most businesses.

Of course, Strix’s small-cap status means its share price is likely to be more volatile than your typical FTSE 100 beast. As an investor with time on his side (I hope!), that doesn’t bother me. However, it might make the shares unsuitable for others with shorter time horizons. 

Positively, Strix appears to have started the year well. Talk of a “strong” order book for January and Q1 should help the company reduce debt even further and continue paying passive income to holders. As far as the latter’s concerned, a 7.7p per share total dividend becomes a trailing yield of 3.3%, based on today’s share price.  

Boring… but beautiful?

Another small-cap generating passive income for its holders is XPS Pensions (LSE: XPS). Analysts have estimated a 6.6p per share cash return in the current financial year (ending 31 March). Using today’s share price, this gives a chunky forecast yield of 5.5%. For perspective, the best I can get from a Cash ISA at the moment is a measly 0.55%! Trading at 12 times forecast earnings, XPS also looks very reasonably priced, in my opinion. 

Any downsides? Well, the likely share price performance is unlikely to quicken pulses soon. As the largest pensions consultancy in the UK, XPS will never attract the sort of attention that other stocks might. This being the case, I wonder if the biggest risk in buying XPS is the opportunity cost of not taking opportunities elsewhere. 

Still, if I was looking for a relatively mundane, uncyclical business that pays out cash to its owners without too much fuss, XPS surely ticks the box! 

Outperforming expectations

A final under-the-radar small-cap stock offering decent passive income is pawnbroker H&T (LSE: HAT). Benefiting from strong demand for jewellery, and the fact that most of its 253 stores could remain open, the company experienced “stronger than anticipated trading” in the final two months of 2020. This, H&T believes, will now lead it to outperform market expectations on profit for the full year.

Sure, some investors may be put off by the image of the industry in which H&T operates. The small matter of the company’s unsecured cash loans business being reviewed by the Financial Conduct Authority is an example of this.

For those comfortable with the ethics of this sector however, analysts currently have the company down to return 9.7p per share for 2020. That would equate to a 3.4% yield at the current share price. Factor in a £34m cash balance and no debt and I suspect cash payouts might rise again in 2021.

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The only problem with this strategy is that the coronavirus pandemic has forced many companies to withdraw their cash payouts. Many, but not all. Today, I’m going to look at two minnows that continue to offer very tempting dividends and also trade on low valuations. 

Cash ISA beater

I doubt many private investors are familiar with Wynnstay (LSE: WYN). Let me bring those of you up to speed. This firm manufactures and supplies agricultural products, such as animal feeds, fertiliser, and seeds. It also operates rural outlets, serving farmers and pet owners.

Rather conveniently, the £55m-cap also reported to the market last week. At £229.3m, revenue was 12% lower in the six months to the end of April, compared to the same period last year, as a result of commodity price deflation.

Nevertheless, adjusted operating profit rose 8% to £4.78m, with reported pre-tax profit up 4% to £4.3m. This was deemed a “resilient” performance by management in light of “exceptionally challenging market conditions.“

According to CEO Gareth Davies: “Wynnstay’s broad spread of agricultural activities is a significant strength, acting as a natural hedge against sector variations.” Even so, the company believes the rest of the year is likely to be tough going, due to the pandemic and Brexit-linked uncertainty. No real surprise there.

Now, what about those dividends? The confirmed interim payout of 4.6p per share might be the same as last year. But the fact the company is willing to pay up in this market environment, gives me confidence. Analysts are forecasting a total return of 14.2p per share in FY20, giving a stonking yield of almost 5.3%.

It’s also worth highlighting that Wynnstay trades on just 9 times earnings. While this may reflect ongoing threats and wafer-thin margins, I’d feel more comfortable taking a risk here than accepting the chicken feed offered by a Cash ISA.

Another dividend delight

Actuarial, consulting, and administration business XPS Pensions Group (LSE: XPS) may not quicken the pulse, but it’s another great small-cap dividend pick, in my view.

Like Wynnstay, it announced numbers to the market last week. Through a combination of new client wins and a boost from acquisitions, total revenue rose 9% to just under £120m in the year to the end of March. Pre-tax profit came in flat at £11.1m.  

I suspect XPS has just what a lot of investors want right now. Thanks to the essential nature of its work, earnings visibility is high. Moreover, the company suspects the pandemic is likely to increase demand for additional services over the short term.

That said, XPS has also said it could lose some earnings momentum. That’s if discretionary projects are deferred by trustees and new business opportunities continue to slow. A similarly mixed outlook then.

And the dividends? A total payout of 6.6p may be the same as the previous year, but this still gives a very satisfying trailing yield of 5.6%. I’d expect something similar in FY21.

Again, the shares aren’t expensive. XPS trades on just 11 times forecast earnings. 

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