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3i Group‘s (LSE:III) been one of the worst-performing FTSE 100 stocks of 2026. But I think the share price could be set for a big rebound in 2027.
French bond yields hitting their highest level since 2002 is bad news for Paris – and businesses based there. For investors however, there might be an opportunity.
How do we get there?
The first part of the story’s valuation. The stock trades at a price-to-book (P/B) ratio of 0.76, compared to a 10-year average of 1.28.
A return to that average would mean a 68% increase in the share price. That’s most of the way – the rest needs to come from growth in net asset value (NAV) per share.
Working backwards, NAV per share needs to grow around 19% by the end of 2027. That’s roughly 12% a year from the latest (30 June) figure – and 3i’s done much better than that recently:
| Year (to 31 March) | NAV per share | Growth |
|---|---|---|
| 2022 | 1,321p | 39.5% |
| 2023 | 1,745p | 32.1% |
| 2024 | 2,085p | 19.5% |
| 2025 | 2,542p | 21.9% |
| 2026 | 3,030p | 19.2% |
Even its weakest year delivered more growth than the company needs over the next 18 months. And that’s after paying dividends.
That’s an intriguing prospect, but something needs to happen to get the valuation multiple back to its historic average. And there’s plenty in the way of that right now.
Why’s the stock down?
3i’s biggest investment by far is a business called Action. The discount retailer has been a terrific performer, which is why it makes up so much of the FTSE 100 firm’s portfolio.
Action has a strong competitive position and plenty of scope for opening new stores. The trouble is, France is its biggest market and things are rough over there at the moment.
French like-for-like sales grew just 0.9% earlier this year. And the macro risks remain – French 10-year bond yields are high and (unlike the UK or the US) France can’t issue debt in its own currency.
The risk is that this continues and that could keep 3i’s valuation multiple depressed. But I think it’s worth keeping in context what it means for a business like Action.
For one thing, the retailer reports most of its stores are on side streets, away from the riots. Looters in Marseille and Lille were more interested in Hermès and Apple – not the €2 scented candles.
Action also has major opportunities elsewhere. It’s just entered Croatia, has both Slovenia and Bulgaria lined up, and is targeting 1,000 US stores further down the line.
What does this mean?
Right now, I’m watching France, as well as 3i’s broader plans. But I definitely think some of the challenges are short-term operational issues and the firm has a strong long-term position.
3i’s approach of investing opportunistically with its own capital is unchanged, and that’s been the key to its success.
I don’t know exactly when things will get back to normal, but I’m convinced they will and I think the end of 2027’s a realistic target. I may be wrong, but there’s now a 3.7% dividend yield while I wait.
That’s why I’m adding to my investment while there’s volatility around. But — unlike the private equity firm — I’m not letting my portfolio get concentrated in any one name.
Should you invest £5,000 in 3i Group Plc right now?
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Stephen Wright owns shares in Apple and 3i Group
