Rolls-Royce shares have largely dominated the UK ‘growth’ narrative in recent years. But one lesser-known bank stock has enjoyed a surprisingly similar trajectory.
Lion Finance (LSE: BGEO), previously Bank of Georgia, has closely tracked Rolls for much of the past five years.
But that’s where the similarities end. When you take a closer look, the two companies are currently in very different financial positions. With many growth hunters asking if the Rolls opportunity has passed, I’m wondering if Lion Finance is a hidden gem waiting to be discovered?
Growth rates and market history
To understand the scale of these two companies, we have to look beyond the hype. Over the last five years, Rolls-Royce has delivered over a 1,000% return, narrowly outpacing Lion Finance’s impressive 950% gain.
However, if you stretch that lens back to a decade, the narrative shifts significantly. Lion Finance has returned around 660% while Rolls-Royce sits below 400% (as of 30 April).
This tells us that while Rolls has dominated recent headlines, Lion’s been a more consistent, long-term compounder.
Crucially, these returns aren’t just market noise, they’re anchored in fundamental business performance. Rolls’ recent surge has been fueled by a dramatic operational turnaround in its civil aerospace business and rock-solid defence contracts.
Lion Finance, conversely, has been quietly compounding earnings at a rapid pace. Earnings at the firm have climbed from just £1.37 per share back in 2020 to an impressive £13.87 by 2025.
That kind of earnings growth is exactly what fuels share prices over the long haul, proving that both companies have been firing on all cylinders.
So which is the better option?
When you dig into the numbers, it becomes clear why Lion caught my attention as a stock to consider right now. It currently trades at a price-to-earnings (P/E) ratio of 7.89 and a price-to-book (P/B) ratio of 1.99. That makes it look significantly cheaper than Rolls-Royce by almost any traditional metric.
However, a low price tag is not a free lunch. Investors should also consider these factors:
- Valuation: while the current metrics indicate undervalution, they also suggest investors are wary about potential risks.
- Low yield: at only 2.63%, it offers little to income investors. However, recent dividend growth suggests it aims to improve this.
- Geopolitical risk: this is the elephant in the room. As a major financial entity operating in Georgia, the company remains highly susceptible to regional political instability.
The bottom line
If you are looking for a bargain, Lion Finance certainly looks more attractive on paper. But as always, that discount is the market’s way of pricing in potential danger.
Ultimately, Rolls-Royce remains the safer, more reliable option for most. It’s backed by essential government contracts and possesses a deeply established local footprint that provides a natural defensive moat.
Lion represents more of a high-risk/high-reward play, but it’s certainly worth considering as a small allocation if you have the stomach for it.
As with any investment, never forget the importance of proper risk management and always keep your portfolio well-diversified.
