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With a price-to-book (P/B) ratio of just 0.66, IP Group (LSE:IPO) looks like one of the ‘cheapest’ stocks on the FTSE 250. It also has a low price-to-earnings (P/E) ratio of just 9.23, a level usually only seen on stocks with a tanking share price.
But that’s not the case here. The share price is actually up 26% year-to-date. That combination suggests a recovery has already kicked in, but the market’s slow to revalue it. So I had to take a look and see if this is a genuine recovery story, or just short-term hype.
What IP Group does
IP Group isn’t a conventional company but rather a platform that does venture capital and private equity investing. Its core focus is on unlisted university spin‑outs and innovative start-ups across life sciences, physics, energy, healthcare, and telecommunications.
It earns revenue through fair‑value gains, exits and fund-management fees but reports net asset value (NAV) per share as its key metric. As such, standard earnings ratios can look odd year to year.
That’s why I need to dig deeper to understand if the stock’s truly undervalued.
Valuation assessment
In 2025, the group’s NAV recovered to £975.1m from £952.5m, turning it from a £207m loss to a £66.9m profit. That’s the most likely catalyst that kicked off a price recovery in mid-2025.
The NAV per share also rose to 110.4p, around 35% higher than the current share price — which explains the low P/B ratio. That gap narrowed from around 45% in 2024, highlighting the current growth trajectory.
If that continues, it could equate to significant gains over the coming 12 months. Analyst coverage is limited but I managed to find two price targets of 110p and 119p, implying growth of between 50%-63%.
What’s driving the recovery?
In 2024, IP Group racked up total cash proceeds from exits of £183.4m, almost five times 2023. Much of that cash came from the sale of Featurespace to Visa and Garrison Technology to Everfox. Those exits left the group with gross cash and deposits of £285.6m, declining to £211m by year‑end 2025 following investments and buybacks.
The group’s portfolio looks to be maturing nicely, particularly with investments in Oxford Nanopore and several therapeutics and clean‑energy businesses.
So what could go wrong?
A key risk is that IP Group’s returns are highly volatile and heavily dependent on fair‑value movements and exits from early‑stage science and tech businesses. That’s quite different to the steady sale income or operating profits of normal businesses.
As a result, it’s had negative operating cash flow in recent years, and not particularly strong shareholder returns. If new investment opportunities dry up, or its early-stage bets don’t pay off, the next set of results could disappoint.
Final thoughts
Due to its focus on investing in start-ups, IP Group presents more like a high-risk/high-reward penny stock than an established FTSE 250 company.
However, its exposure to specialist science and tech ventures has proven profitable in the past. For investors looking for exposure to this type of niche private equity, it offers a rare opportunity that’s worth keeping in mind.
But the risks warrant closer inspection, and I’d only consider it as a small allocation in a broadly diversified portfolio.
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Mark Hartley does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
