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If I asked a random sample of investors to name some of the top-performing growth stocks on the FTSE 100 over the past five years, the chances are they would probably pick Rolls-Royce Holdings and Lloyds Banking Group. And they’d be right to do so.
But I reckon 3i Group (LSE:III), the little-known investment company, would be a long way down their lists. However, despite its relative obscurity, the group’s seen its share price more than triple since January 2021. This makes it the thirteenth-best performer on the index. What’s more, over this period, shareholders have also enjoyed a modest dividend.
Can it repeat this impressive performance over the next five years? Let’s take a closer look.
Looking for value for money
Generally speaking, a growth stock tends to attract a higher-than-average earnings multiple. That’s because investors have priced in their expectations of significant profit growth.
But currently (30 January), 3i Group has the lowest trailing 12-months price-to-earnings ratio on the index. Although this could imply it’s cheap, it doesn’t suggest investors view it as a high-growth stock.
However, I believe this is the wrong way to look at 3i. As an investment vehicle, it’s all about increasing the value of the businesses in its portfolio. Indeed, the company measures its own performance using the return it achieves on opening shareholders’ funds. For the 12 months ended 31 March 2025 (FY25), this was an impressive 25%. For the first half of FY26, it delivered a 13% return.
But there’s one issue that gives me cause for concern.
High concentration
At 31 December 2025, 3i owned 62.3% of Action, the fastest-growing non-food discounter in Europe, with over 3,100 stores. It first acquired a stake in the Dutch retailer in 2011 for £134m and has since been increasing its position by using the dividends paid by the company. The group values its shareholding at £22.3bn, equivalent to 74% of its investment portfolio and 71% of its current market cap.
But the discount retail sector is struggling at the moment. And according to RBC, Action’s valued at 28 times its current year expected earnings, which the broker says is “on the full side”.
Am I tempted?
Surprisingly, the group’s stock’s now changing hands for approximately 20% less than at the end of October 2025. In early November, investors took fright when 3i said it was focusing on lower-risk investments, which could lead to smaller returns. But on 29 January, the group’s shares jumped 9% after it reported a strong set of results for the first nine months of FY26.
As well as its private equity business, the group has a “counter-cyclical” infrastructure arm. This should provide some earnings protection should economic conditions worsen.
But I see the recent share price pullback as more of an opportunity than a threat. Of course, it’s impossible to know for sure whether 3i will repeat its recent share price performance over the next five years but, given its recent track record, there’s a good chance.
On this basis, I can see why 3i might appeal to long-term growth investors. But I have concerns that its valuation of Action might not be justified by its underlying performance. Therefore, acknowledging that it’s difficult valuing private companies, I think there are better opportunities elsewhere.
