Every three months, certain UK-based stocks typically undergo a reshuffle between the FTSE 100 and the FTSE 250 indices. This process is determined by the fluctuations in share price and corresponding shifts in market capitalisation. At present, it appears that three particular stocks are poised for inclusion in the mid-cap index, namely, Wickes (LSE:WIX), Gamma Communications (LSE:GAMA), and Avon Technologies (LSE:AVON).
When assessing a stock, my primary focus is always on its growth potential. Ideally, I want to put my money into a company that not only demonstrates solid growth but also indicates the potential for consistent future growth. Based on these criteria, Wickes may not be the most favourable choice for my investment portfolio.
Despite being up by 46% so far this year, Wickes’ share price remains around 11% lower than its initial listing price in 2021, following its separation from Travis Perkins. Wickes’ business revolves around offering DIY products, and as a result, its fortunes swing with changes in elements such as inflation and the broader economic landscape.
Yet, there is a flicker of hope, as proven by a hike in recent financial metrics. In the opening 17 weeks of 2025, the company’s revenue experienced a year-on-year increase of 6.9%, reaching £533m. This profit boost was attributed to a strategic shift in its client demographic, with Wickes reporting an uptick in patronage from local trade professionals.
However, if the economy slides into a downturn or inflation rises drastically, it could hit the brakes on this growth trend. As it is, the company offers a decent dividend yield of 5% and a reasonable forward price-to-earnings (P/E) ratio of 11.6, based on next year’s projections. Yet, the growth scenario, on the whole, doesn’t exactly inspire confidence. For instance, the company’s revenue, which was £1.55bn in 2023, is forecast to hover just below £1.7bn in 2026, indicating limited top-line growth.
Conversely, Avon Technologies seems to offer a more compelling story. The company manufactures critical items such as gas masks, combat helmets, and varying breathing devices. I believe the demand for these products will remain solid, with Europe re-arming itself and global defence spending still high.
This expectation is further underscored by robust financial results; Avon’s revenue for the first half-year surged nearly 17% to $148.7m, while its order book saw a 24% uptick, valued at $247m. However, at 30 times projected earnings for the current fiscal year (ending in September), the stock may seem overpriced for some investors.
Among the three, the stock that sparks my curiosity the most is Gamma Communications, a company with a market capitalisation of £1.1bn. Gamma’s unique selling point is its cloud-based communication and connectivity solutions, primarily targeted at small to medium-sized businesses. What’s more intriguing is Gamma’s increasing footprint in countries such as Spain, Germany, and the Netherlands, signaling a push towards greater diversification.
Furthermore, the firm has displayed impressive performance over the years, with a compound annual growth rate (CAGR) of 12% in revenue and 14% in earnings. The prospects for future growth look equally promising, thanks in large part to Gamma’s disruptive approach of integrating telephony, internet, mobile, and security services onto one platform.
Finally, the valuation metrics do seem to tip the scales in Gamma’s favor. Its forward P/E ratio, only 12.5, is quite attractive, especially when you factor in the growth implications. To sum it up, while each company has its own charm, Gamma Communications appears to hold the most promise in terms of growth and valuation, making it an interesting prospect to watch.