Analysts think these FTSE 100 stocks could double. Would I buy?

Some analysts think the stock prices of FTSE 100 members Polymetal, HSBC and Melrose could double. What am I doing with this information?

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According to the most optimistic analyst share price targets, the share prices of FTSE 100 members Polymetal International (LSE: POLY), Melrose Industries (LSE: MRO) and HSBC Holdings (LSE: HSBA) could more than double over the next 12 months. Polymetal, a precious metals and copper miner, has been forecast to rise 204% over the next year. One analyst thinks that Melrose, an industrial conglomerate focusing on aerospace, will see its share price rise 170% over 12 months. Finally, shares in banking giant HSBC are forecast to rise 167% in the same time frame.

Analyst price targets

These are the most optimistic 12-month price forecasts for the three FTSE 100 stocks. But, I want to see what more pessimistic analysts think too. That means checking the average and low-end estimates. For example, if one analyst thinks a stock will double, but another thinks the same share price will halve, I am likely to move on. But if the low estimate is at least above the price staying flat, I remain interested.

Analyst 12-month percentage price change estimates for Polymetal, Melrose, and HSBC:

  High  Mean Median Low
Polymetal International 204% 66% 55% 8%
Melrose Industries 170% 85% 84% 10%
HSBC Holdings 167% 60% 55% 24%

Source: Financial Times Markets Data

Polymetal, Melrose and HSBC are all expected to have positive returns by the most pessimistic analysts. And, the average estimates are also impressive. So, these three FTSE 100 stocks look like potential winners. But I would not buy just based on an analyst price target looking good.

Could these FTSE 100 stocks double?

I do find looking at analyst estimates useful. There are 100 or so stocks in the FTSE 100 to consider. Stepping into the FTSE All-Share and AIM market means I am dealing with thousands of stocks. Analyst price targets can help cut this list down to size.

But before rushing in to buy, I would want to see how the analysts were justifying their share price targets. Unfortunately, while aggregate share price targets and recommendations are relatively inexpensive or free to obtain, the actual analyst reports are not easy to come by. So, without the benefit of reading the equity research reports to see if I agree with an analyst’s investment thesis, I will have to do my own homework around these three FTSE 100 stocks.

I already own shares in Polymetal. I bought these early in 2021. My thinking was that industrial demand for its copper, silver and gold would grow as the world opened up and the pandemic abated. Inflation is also expected to tick up this year, which is good for the prices of the metals that Polymetal mines. With analysts positive about the stock, that is encouraging, and I will not be selling my Polymetal shares any time soon.

I am not as familiar with Melrose and HSBC. Both shares slumped last year and have still not recovered their pre-pandemic highs. Just getting back to where they were in early 2020 would be a significant gain, and that could perhaps be expected to follow from the world getting back to normal. For HSBC, interest rate rises would certainly help, and its pivot towards Asia could pay off handsomely in the future. For Melrose, a recovery of the civil aviation industry should help it get back on track. But, even though the analysts fancy HSBC and Melrose, there is still too much uncertainty for me, and I won’t be adding them to my Stocks and Shares ISA.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James J. McCombie owns shares in Polymetal. The Motley Fool UK has recommended HSBC Holdings and Melrose. 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.

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