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Just because I’m a long-term investor, it doesn’t mean that I’m not looking for UK stocks that could give me explosive returns in the coming years. I want to own shares that could double in value, but I’m not expecting it to happen in a week. Below is one idea that I think has the potential to rally sustainably going forward.
Details of the company
The first is Alpha Group International (LSE:ALPH). The FTSE 250 stock is up 28% over the last year. Over the past five years, it’s up 244%. So although I can’t simply say that in the next five years (to 2030) that it will double based on the historical performance, it does provide me with an indication that it’s not impossible.
The company provides foreign exchange and alternative banking solutions to corporates. It makes money by charging fees and transaction commissions. In some ways, it operates like a bank, but because it specialises in certain payment and treasury services, it’s much more nimble. Given the extensive use of technology, it’s ahead of traditional banks. If it continues to innovate and stay ahead of the curve, the stock can keep rallying.
Why it could jump
I think the stock could double over the next five years based on the continued revenue trajectory and profitability. The 2024 report showed a 21% growth in revenue, with a 16% increase in client numbers. When I look back at previous years, it’s a similar story. I don’t see any material reason why this pace of growth can’t keep going. If it does, the jump in earnings (assuming a similar 20% annual growth rate) would justify the share price being 100% higher in five years’ time.
The business’s net profit went from £12.47m in 2020 to £93.02m last year. This growth was predominantly organic, meaning that it was mainly due to ongoing business operations.
Now, let’s factor in inorganic growth. In 2023, Alpha Group bought Cobase, a bank connectivity fintech. The revenue contribution from Cobase increased from £0.2m in 2023 to £2.9m in 2024 and is expected to continue growing. If Alpha Group buys other linked businesses, this could ramp up revenue and profitability at an even faster pace.
Some will argue that growth will slow down as it gets larger. This is true, but I don’t think we’re anywhere close to getting there yet. The company has a market cap of £1.12bn. One of the largest payment and foreign exchange providers is Corpay, which has a market cap of £16.25bn. Doubling the share price (and therefore increasing the market cap) wouldn’t be unrealistic when looking at the overall size of the sector.
A risk to note
The main risk to my view is based on higher competition. Traditional banks are starting to catch on that fintech firms like Alpha Group are taking income away and processing a large amount of payments. If the banks decide to really push on this area, growth for Alpha Group could slow down to an extent that doubling the stock price becomes a fantasy.
Even with that concern, I still think it’s a great stock for my portfolio and I’m seriously thinking about adding it when I have some free cash.
