When exploring the track records of FTSE 100 stocks, few come close their the stellar performance of Diploma (LSE:DPLM).
Over the last 25 years, through a combination of organic and acquisitive growth, the industrial technologies group successfully integrated itself at the heart of the aerospace, healthcare, renewables, infrastructure, and industrial automation industries.
The result? Since November 2000, the share price has increased by 11,091%. But this return has more than doubled for anyone who intelligently reinvested dividends paid along the way, unlocking a total return of 22,612%.
Just to put that into perspective, that means anyone who invested £20,000 in Diploma shares 25 years ago now has £4,522,510 sitting in the bank. That’s an average return of 24.2% per year – even better than Warren Buffett’s world-leading track record of 19.9%.
Of course, past performance doesn’t guarantee future results. So, the question now becomes, should investors still consider adding this elite FTSE 100 stock to their portfolios?
The bull case
With a market cap of £7.1bn, Diploma is unlikely to generate another 226x return over the next two-and-a-half decades. Nevertheless, the business still holds strong potential for market-beating returns.
Diploma is well-positioned to capitalise on structural growth drivers across its target markets. After all, the company operates with a highly cash-generative and decentralised business model, fostering an entrepreneurial culture across its various businesses.
This corporate structure paves the way for faster innovation and superior long-term scalability as we’ve already witnessed over the last 25 years. But it’s also proven to be an effective strategy for integrating bolt-on acquisitions as well as stimulating organic growth. And even in 2025, that’s still translating into double-digit expansion.
Looking at the group’s latest full-year results, revenue growth reached 11% with sales climbing from £1.36bn to £1.52bn year on year. At the same time, a 160 basis point expansion in profit margins enabled a 20% jump in underlying operating profits and a 25% surge in free cash flow.
Put simply, even as a multi-billion-pound FTSE 100 enterprise, Diploma continues to fire on all cylinders.
The bear case
The entrepreneurial approach to acquisitions does help reduce risk. But the company is nonetheless still exposed to potentially poor execution, not just during takeover deals, but during regular trading as well.
By operating within the industrials, aerospace, and healthcare sectors, among others, Diploma often has to fit inside just-in-time supply chains where customers synchronise orders with production schedules.
However, that also means if Diploma can’t keep up or suffers its own supply chain disruption, customer orders go unfulfilled, potentially pushing them into the arms of competitors. It also exposes the group to economic slowdowns. While healthcare tends to be quite defensive, industrial manufacturing is often less so, hampering demand.
The bottom line
Diploma shares are among the few UK stocks that actually trade at a premium valuation. Investors have clearly not failed to notice the exceptional quality of this enterprise. And that does open the door to volatility, if management is unable to keep up with lofty investor expectations.
However, in my opinion, that premium is well-deserved. And with a track record of consistently defying expectations even in 2025, Diploma shares are still worth considering for the long-term potential. And it’s not the only FTSE 100 stock I’ve got my eye on right now.
