Financial stocks in the FTSE 100 such as Lloyds, Barclays, and Aviva are doing really well in 2025. Year to date, these three stocks are all up more than 30%.
Looking ahead, these well-known shares could continue to generate gains for investors. However, there’s another financial company in the Footsie that I reckon has more investment potential over the next 12 months…
A world-class company
The stock I’m talking about is London Stock Exchange Group (LSE: LSEG), or LSEG for short. It’s the owner of the London Stock Exchange and LSEG Data & Analytics.
I’m cheating a bit when I say it’s a financial company. Because while it’s officially classified as one, these days it’s far more of a tech company (it provides financial data to banks and investment managers worldwide).
Now, crunching the numbers, I reckon this stock is capable of returning nearly 30% over the next 12 months. That’s a higher return than I expect to see from Lloyds, Barclays, and Aviva, given their recent gains.
My calculations
As for how I get that figure, here are my calculations. Next year (FY26), LSEG’s forecast to grow its earnings per share by 11% to 436p. That puts the stock on a forward-looking price-to-earnings (P/E) ratio of 24.4 today.
Let’s say that this time next year, analysts are pencilling in 10% earnings per share growth for 2027. That would take FY27 earnings per share to 480p.
And let’s also say that we see some earnings multiple expansion over the next 12 months. I wouldn’t be surprised to see the P/E ratio here rise from 24.4 to 28 as investors come to realise that this is a fully-fledged technology/data company with artificial intelligence (AI) solutions, reliable blue-chip customers, and recurring revenues.
Multiply 480p by 28 and we get a share price of 13,440p, which is 26% higher than today’s. Add in the dividend yield of 1.3% and we are looking at a potential return of about 27% – an attractive return for a large-cap Footsie stock.
It’s worth noting that my share price target is in line with quite a few brokers’ targets. For example, earlier this month analysts at UBS upgraded LSEG to Buy and slapped a 13,500p price target on the stock.
The average price target is a bit lower at 12,873p. That still represents a 21% gain from here though.
Forecasts are often wrong
Of course, my predictions and forecasts could turn out to be badly wrong. For example, FY27 earnings may not grow by anywhere near 10% (especially if there’s a major downturn in the financial markets). Meanwhile, the stock may not see any multiple expansion over the next 12 months (if tech shares tank we could even see multiple contraction).
I’m quite bullish on this Footsie stock however. I see plenty of long-term potential and I reckon it’s worth considering today.
