On the face of it, 3i Group (LSE: III) looks like it might be one of best bargains in the FTSE 100. Its forecast price-to-earnings (P/E) ratio of just five is one of the lowest in the whole index right now.

Broker forecasts are generally pretty bullish too, with a fairly strong Buy consensus out there. But I’m not rushing to snap up the shares cheaply, for one key reason. Let’s dig in to see what that is…

Here’s what it does

3i is an investment trust, with a market cap of £27bn. It puts shareholders’ money into private businesses and infrastructure. And that provides investors with a route into assets that could otherwise be tricky to get hold of. But the shares have fallen 40% since their peak in October 2025.

The reason is because 3I’s portfolio is heavily weighted to one specific investment — the European discount retailer Action. This has been a textbook example of growth success. It operates over 3,500 stores across 15 countries, and serves an average 22.7 million customers each week. But its stellar growth has started to slip.

Over the six months to 28 June 2026, Action delivered like-for-like sales growth of 3.6%. That’s positive, but it’s slipping from the 4.9% recorded in 2025.

Valuation, valuation

Remember the downfall of once-beloved investing guru Neil Woodford? He was heavily into private equity too. And that led to two problems.

One was that investors couldn’t independently work out valuations on the holdings. The other was that such assets can be very illiquid and difficult to offload when people want their money out.

Fortunately, 3I doesn’t face the second problem. It’s an investment trust, so shareholders can simply sell their shares. Still, the way the price has cratered does suggest discomfort with the first issue — valuation.

Discount, what discount?

3i shares currently trade on a discount of around 14% to net asset value (NAV). But that NAV depends largely on the valuation of Action, which only 3i itself can tell us.

The trust currently values Action on an EBITDA multiple of 18.5 times. And the stock market reaction of the past 12 months suggests not everyone shares that, perhaps optimistic, rating.

If the market rates Action at even just a few points less than that, it could make a dent in 3i’s NAV. And that discount could quickly shrink.

What’s the positive?

My negativity is entirely based on 3i’s very heavy weighting in one key retailer — and it’s one whose internal accounts I can’t readily judge for myself. Plus we’re still in a very tough inflationary environment.

But on the bright side, Action is still actually trading pretty well. And on that basis, investors might do well to consider buying 3i shares while they’re down.

For me though, I at least want to see where the market’s take on valuation settles. And that could take another quarter or two. But I definitely could change my mind.

In the meantime, there are plenty of other attractive opportunities to consider…

Should you invest £5,000 in 3i Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if 3i Group Plc made the list?

Alan Oscroft does not hold any positions in the companies mentioned.