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Lloyds Banking Group stock has surged 58% in the last year and is currently close to 52-week highs. Despite the upbeat tone around the business, I think it now looks fairly valued. This means I don’t see it as a cheap UK share to consider buying. Here are two other options that I believe offer greater potential for the coming year.
Building for the future
The first one is Persimmon (LSE:PSN). Unlike Lloyds, which has already surged higher in the past year, Persimmon stock is down 2% in the last year. Yet, momentum appears to be building for a move higher in the share price.
Last week, the business put out a trading statement saying the company has performed well in 2025 with increased sales rates, more sales outlets and forward sales up 15%. This indicates better near-term revenue visibility as we head into 2026. That kind of operational improvement can translate into strong earnings beats for the coming quarters, ultimately helping to lift the share price.
Another reason Persimmon could outperform Lloyds is lower interest rates. Housebuilders typically outperform other sectors during periods when interest rates fall. This is because mortgage affordability improves, boosting housing demand. I think the Bank of England committee will accelerate the pace of rate cuts into next year to help the economy.
Of course, there are risks. Potential changes to taxation from the Budget next week could hinder things, especially if stamp duty gets cut or if policy towards housing becomes less accommodating. This could change investors’ sentiment about the stock’s valuation.
Operating in a key sector
Another company to consider is Kainos Group (LSE:KNOS). The FTSE 250 stock is up 16% over the past year, but I think it could continue to surge in the coming year.
Kainos is well-positioned in the digital transformation space and the AI evolution. After all, its core business is providing digital technology and software services. Last year, it worked with the UK government on implementing AI-related products and services for the defence department.
I think the business can outperform Lloyds as it has more ability to scale in a rapidly growing market. Banking can grow as well, but not at the same pace. Kainos has strong profit margins and some subscription revenue, allowing it to benefit from economies of scale if it can maintain its growth trajectory.
It’s true that half-year profits took a hit when results were announced earlier in November. This was partly blamed on higher labour costs and increased investment. Even though rising costs are a risk going forward, I don’t see the boost to investment as being a bad thing for the long term.
Of course, I can’t say for sure if either of these picks will outperform Lloyds for the coming year. But based on the momentum both companies have right now, I think they are options for investors to consider.
