£10,000 invested in FTSE 250 shares 5 years ago would be worth over £30,000 today.

XPS Pension Group (London Stock Exchange: XPS) is a new addition to FCS index 250having joined the index a couple of months ago. But investors who knew about it in 2019 could have done well.

Over the past five years the share price has risen from £1.18 per share to £3.60. And as the company continues to deliver impressive results, it’s possible there will be even more to come.

What does the company do?

As the name suggests, XPS specializes in pensions advice. This includes helping companies stay ahead of regulatory changes as well as providing investment advice.

This is the exact opposite of semiconductor design. But it’s an important industry that requires specialized understanding, and the need isn’t likely to go away anytime soon.

Five years ago, for £10,000 I would have bought 8,474 shares in the company. At today’s prices its market value would be £30,508.

At that time, income nearly doubled, but wider operating margins meant profits grew much faster. So I think it’s definitely worth taking a closer look at.

Business for people

For consulting companies, their people are their most important asset. This has its advantages, but there are also disadvantages.

The upside is that XPS doesn’t have a lot of machinery and equipment. This is a positive thing: these things need maintenance and repairs that people don’t do.

The downside is that humans can create competing operations in a way that machines cannot. To limit this risk, companies need to continue to pay their employees well, but this comes at a cost to shareholders.

XPS does this by paying employees with capital. But that has caused the number of shares to more than double since 2016, sending the value of each share outstanding down about 56%.

Is it worth it?

Issuing more shares is XPS’s way of investing in itself, but the big question is whether the company will get a good return on that investment. And recent data is encouraging.

Over the past five years, operating income has grown by 250%, and the number of shares has increased by 2.5%. The extra profit was clearly worth the dilution.

Taking into account the increase in the number of shares outstanding, operating profit has grown by almost 15% per year since 2019. By any standard this is a strong result.

Investors will want to make sure that growth continues: if the growth rate slows, the equation will become much less attractive. But I think it’s been a clear success lately.

Stocks to Consider Buying

The risk of XPS Pension Group employees using their industry knowledge to set up a rival firm cannot be ignored. But the company has strong relationships with customers that help limit this.

I think investors should consider this stock. If earnings growth continues to outpace growth in shares outstanding, shareholders will continue to benefit as a result.