We recently published a list of 8 High Growth UK Stocks to Invest In. In this article, we are going to take a look at where Roivant Sciences (NASDAQ:ROIV) stands against other high growth UK stocks to invest in.

According to a KPMG report, the United Kingdom’s GDP growth is projected to slow in the second half of 2024 but is expected to rise slightly to 1.2% in 2025. This growth will likely be driven by a less restrictive monetary policy and ongoing improvements in real wages, which could boost consumption and business investment. However, in the longer term, GDP growth may be limited to around 1.1% per year due to historically slow productivity growth.

UK inflation is forecasted to rise to 3% by early 2025, after dropping below 2%, this increase is attributed to the ongoing economic recovery and the impact of interest rate cuts on the economy. The Bank of England is expected to take a cautious approach to easing monetary policy, with the base rate expected to reach 3.5% by the end of 2025. This indicates that the central bank will be careful not to overstimulate the economy, in order to avoid overheating and inflationary pressures.

UK consumers have been saving a larger portion of their income, which may continue to limit spending growth. While some of this increase in savings could reverse as interest rates fall, a significant portion is likely to remain, driven by long-term demographic trends and heightened caution in response to a more volatile economic environment. In terms of investment, the forecast predicts that overall investment growth will accelerate as further interest rate cuts reduce the burden on business investment.

UK Equities: Attractive Investment Opportunity

Nannette Hechler-Fayd’herbe, Chief Information Officer in Europe, the Middle East, and Africa at Lombard Odier, a Swiss private bank specializing in wealth and asset management, in an interview on Bloomberg, shared her perspectives on the current investment landscape, emphasizing the importance of spreading investment risk more broadly across multi-asset portfolios. Hechler-Fayd’herbe expresses her affinity for UK equities, citing their attractive valuations and sector composition.

She notes that UK equities are trading at forward price-to-earnings ratios similar to those of emerging markets, making them an appealing investment opportunity. The UK equity index, in particular, offers a favorable exposure to the energy sector, which is poised to benefit from a better-than-expected global economy. Additionally, in the event of geopolitical escalation, the energy sector is likely to benefit from higher prices, making it an attractive hedge.

Hechler-Fayd’herbe highlights the sector composition of the UK equity market as a key factor in its appeal. The market’s exposure to the energy sector, combined with its relatively lower volatility and higher dividend yields compared to European equities, makes it an attractive investment opportunity. She also notes that the UK equity market’s dividend yield is more attractive compared to European equities, providing a more stable source of income for investors.

Hechler-Fayd’herbe believes that the Bank of England’s interest rate cuts would potentially lead to a rally in UK equities. Overall, Hechler-Fayd’herbe’s comments suggest that UK equities offer an attractive combination of value, income, and sector composition, making them a compelling investment opportunity in the current market environment.

Our Methodology

To compile our list of the 8 high-growth UK stocks to invest in, we used the Finviz and Yahoo stock screeners to find the 60 largest companies in the UK. We then narrowed our choices to 8 stocks with the highest 5-year revenue growth. We also included their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their of their revenue growth.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A research scientist in a lab coat examining a sample of blood for sickle cell diseases.

Roivant Sciences (NASDAQ:ROIV)  

5-Year Revenue CAGR: 121.82%  

No of Hedge Funds: 62

Roivant Sciences (NASDAQ:ROIV) is a biopharmaceutical company that focuses on rapidly developing innovative therapies through its unique “Vant” model. This model involves creating or acquiring subsidiary companies focused on specific disease areas or technology platforms. Roivant Sciences (NASDAQ:ROIV) aims to accelerate drug development while reducing the time and cost of bringing new therapies to market.

Roivant Sciences (NASDAQ:ROIV) has a broad pipeline of drugs across various therapeutic areas, including neurology, oncology, and dermatology. The company has established itself as a key player in the biotech sector through its innovative approach and strategic partnerships.

On September 18, Roivant Sciences (NASDAQ:ROIV) announced the sale of its subsidiary, Dermavant Sciences, to Organon & Co. for $1.2 billion. The deal includes the company’s flagship product, VTAMA cream, which is FDA-approved for plaque psoriasis, a common skin condition, and is currently under review for atopic dermatitis, a chronic skin condition. This acquisition is a strategic win-win for both companies, as it enhances Organon’s dermatology portfolio and allows Roivant Sciences (NASDAQ:ROIV) to monetize quickly through sales and retaining potential payments and royalties.

The deal includes an upfront payment of $175 million, a $75 million payment upon regulatory approval for atopic dermatitis, and fees of up to $950 million when achieving specific commercial milestones. Additionally, Roivant Sciences (NASDAQ:ROIV) will receive tiered royalties on net sales.

Roivant Sciences’ (NASDAQ:ROIV) pipeline is promising, with several valuable assets, including Immunovant, Brepocitinib, Genevant Sciences, and Namilumab. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $17.06 that suggests a 35.63% upside potential from its current levels.

Overall, ROIV ranks 1st on our list of high growth UK stocks to invest in. While we acknowledge the potential of ROIV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ROIV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.