JPMorgan has upgraded Diploma PLC (LSE:DPLM), the FTSE 100 technical products group, from 'neutral' to 'overweight', citing greater scope for earnings growth after underestimating upgrades in 2026.
Diploma shares rose 1.46% to 7,305p in morning trading on Monday.
The bank expects organic growth, margins and acquisitions to provide further upside after all three contributed positively to earnings upgrades year to date.
JPM expects organic growth to moderate in financial year 2027 towards its long-term average of about 6%, following two years of particularly strong growth.
It also expects margins to decline from their financial year 2026 peak as spot pricing at Peerless, Diploma's business supplying hydraulic and pneumatic products, adjusts to support continued volume growth.
The American investment bank expects both trends to be reflected in management commentary and market forecasts, reducing the risk of negative surprises for investors.
Its forecasts include only announced acquisitions, but its upside scenario suggests Diploma could deliver double-digit annual earnings-per-share growth through financial year 2030.
JPM raised its December 2027 price target to 8,250p from 5,760p, with the new target based on a 22-times multiple of 2027 enterprise value to operating profit.
JPMorgan described Diploma as a high-quality compounder capable of sustaining double-digit earnings growth in the medium term, supporting its Overweight recommendation.
