IMI: One Company, Three Global Growth Trends

Investors often spend a great deal of time trying to identify the next big trend. Artificial intelligence, electrification, energy infrastructure, healthcare innovation and industrial automation have all captured headlines in recent years. The challenge is that backing a single theme can be risky. Timing matters, valuations can become stretched and today’s market darling can quickly fall out of favour.

Sometimes the better opportunity is finding businesses that quietly sit at the centre of several long-term trends at once.

Positioned Where The Investment Is Happening

IMI specialises in fluid and motion control technologies. In simple terms, its products help customers control the movement of liquids, gases and mechanical systems in highly complex industrial environments.

That description may not sound particularly exciting at first glance, but the industries it serves certainly are.

The company’s Automation division accounts for around two-thirds of group revenue and supplies products into energy, process industries and industrial automation markets. Meanwhile, its Life Technology division serves healthcare, climate control and transport customers.

The common thread linking these businesses is that they all benefit from long-term investment trends.

Global electricity demand continues to rise as artificial intelligence drives rapid growth in data centres. Industrial companies are investing heavily in automation to improve efficiency and productivity. Healthcare spending continues to expand as populations age and demand for advanced medical technologies increases.

Importantly, IMI is not simply supplying equipment into these markets. A significant proportion of revenue comes from servicing, maintenance and replacement parts. This creates recurring, higher-margin revenue streams that help smooth performance through economic cycles.

That combination of structural growth markets and recurring revenues has helped the company deliver six consecutive years of organic growth.

Strong Growth Backed By Improving Quality

One of the most attractive aspects of IMI’s recent performance is that growth is translating directly into higher profitability.

For the year ended December 2025, revenue increased 4% to a record £2.3 billion. Operating profit rose 19% to £422 million, while operating margins expanded from 16.1% to 18.3%.

Those figures tell us something important.

Many companies can grow revenue when market conditions are favourable. Far fewer can simultaneously expand margins and increase profitability. That typically points to strong pricing power, disciplined execution and a business model becoming more efficient as it scales.

The company’s return on capital employed rose to 24.8%, while return on equity reached 28.2%. These are exceptional figures for a large industrial business and underline the quality of the operating model.

The momentum carried into 2026.

In May, IMI reported first-quarter organic revenue growth of 5% and reaffirmed guidance for the full year. Management remains confident of delivering a sixth consecutive year of mid-single-digit organic growth, with adjusted earnings per share expected to come in between 136p and 142p.

The update also provided further evidence of the strength of the underlying markets.

Automation revenue increased 6% during the quarter, supported by energy and industrial automation demand. Life Technology delivered 4% growth, benefiting from continued investment in healthcare and climate control solutions.

Management highlighted a strong pipeline of opportunities linked to growing electricity demand from data centres and wider electrification trends. While investors often focus on technology companies as beneficiaries of artificial intelligence, IMI offers a very different route into the same theme through the infrastructure required to support it.

Returning Capital While Continuing To Grow

Strong businesses generate cash.

The best businesses know how to allocate it.

IMI is increasingly demonstrating both.

Earlier this year, the company announced a £500 million share buyback programme. The first £250 million tranche has now been completed, with the second tranche due to commence shortly.

For a company with a market capitalisation of approximately £7.2 billion, this is a meaningful commitment to shareholder returns.

What makes the announcement particularly encouraging is the context in which it has been made.

Management is not buying back shares because growth opportunities have disappeared. Quite the opposite. The company continues to invest in innovation, pursue organic growth opportunities and maintain a healthy balance sheet, while simultaneously returning significant amounts of capital to shareholders.

Free cash flow per share increased to 127p during 2025, while interest cover remains exceptionally strong. Net debt of £529 million appears entirely manageable given the group’s profitability and cash generation.

The result is a business with considerable flexibility to continue investing for growth while rewarding shareholders along the way.

Paying Up For Quality

The obvious counterargument is valuation.

At around 21 times forecast earnings, IMI is not a cheap stock. Investors looking for deep value opportunities are unlikely to find them here.

However, quality rarely comes at a discount.

This is a business generating returns on capital approaching 25%, delivering consistent organic growth, expanding margins and benefiting from several attractive structural growth trends. Forecast earnings are expected to grow by around 18% this year, while dividend growth continues to outpace inflation.

The shares are trading at a premium because the business deserves one.

The question is not whether IMI looks cheap on traditional valuation metrics. The question is whether the company can continue compounding earnings at attractive rates over the next five to ten years. Based on recent performance and management’s outlook, there is good reason to believe it can.

Technical Analysis: Momentum Remains Constructive

From a technical perspective, the shares remain firmly in an established uptrend.

Importantly, the recent pullback appears to be a normal pause following a breakout rather than the start of a more significant reversal.

Strong trends rarely move in straight lines. Periods of consolidation often provide the foundation for future advances, particularly when they are supported by improving fundamentals.

For now, the technical picture continues to reinforce the positive message coming from the underlying business.

Five Key Takeaways

1. Three powerful growth themes: IMI is exposed to energy infrastructure, industrial automation and healthcare, all of which continue to benefit from long-term investment trends.

2. Improving profitability: Operating profit rose 19% in 2025 while operating margins expanded to a record 18.3%.

3. Exceptional returns: Return on capital employed increased to 24.8%, highlighting the quality of the business model.

4. Significant shareholder returns: A £500 million share buyback programme is underway alongside a growing dividend.

5. Strong momentum: The shares recently broke to fresh highs, supported by improving fundamentals and a constructive long-term trend.