Are these the best UK shares to watch in February 2025?

At the start of 2025, the UK’s economic landscape continues to deliver a mixed outlook. GDP growth for 2024 slowed during the second half of the year, reaching 0.9% by the end of December, down from its prediction of 1.1%. In 2025, it’s expected to rise to 1.6%.

The labour market is expected to remain stagnant as higher employment costs are expected to cause slowing pay growth and fewer vacancies. Unemployment is also expected to increase.

Whilst it’s clear that interest rates are on their way down, these cuts will be more gradual if inflation remains high. At its next meeting on 5 February, the BOE is expected to reduce interest rates by 0.25 basis points from 4.75% to 4.50% as inflation fell to 2.5% in December. That said, it still remains above the BOE’s target figure of 2% and with high levels of service inflation and private companies increasing their prices, it’s possible inflation could increase.

If geopolitical uncertainties ease, these lower rates could positively impact businesses and give them the confidence to commit to long—term investment plans.

Best UK shares to watch

Considering these issues, here are five shares we think could be the best UK stocks to buy now. These dividend, growth or value shares have been selected from recent market news. Always do your own research. Past performance is not a guide to future performance.

Open an account and trade some of the best UK stocks now

1. M&G

2. Vodafone

3. Filtronic

4. Babcock International

5. Card Factory

Top dividend stocks

M&G (LON: MNG)

In its H1 results, savings and investment company M&G reported a 3.7% increase in assets under administration reaching £346bn, up from £333bn the year before. Underlying operating profit dropped 4% but remained higher than market expectations.

Looking ahead, M&G are looking to grow its Asset Management and Wealth side of the business so that it accounts for 50% of the business (it currently accounts for 42%). The company is also looking to phase out its annuity portfolio and legacy products.

In October this year, M&G paid out a dividend of 6.60p, up from 6.50p the year before. The company has a cover ratio of 1.66 which suggests that it's well placed to continue its strong dividend payments throughout 2025.

Our analysts have given the stock a buy rating with an average price target of 235p in the next 12—month period, up 14.34% from its current value.

Dividend yield: 9.61%

Dividend cover ratio: 1.66

Vodafone (LON: VOD)

Telecommunications company Vodafone reported stable H1 results with revenue increasing 1.8% year— on— year to €18.3 billion. This was driven by growth in Africa, Turkey and Other Europe which helped offset slower sales in Germany. EBITDA also increased by 3.7% to €5.4 billion and net debt was down 12% to €31.7 billion.

The company are due to pay a dividend of 2.25¢ to shareholders on 7 February 2025, with a full year target of 4.50¢. This was reduced from 4.50¢ the year before after selling its Spanish and Italian businesses. The company has a cover ratio of 6.04 which indicates the company has the cash to continue dividend payments in 2025.

Our analysts have given the stock a hold rating with an average price target of 85p, up 26% from its current value.

Dividend yield: 8.32%

Dividend cover ratio: 6.04

Top growth stocks

Filtronic (LON: FTC)

Filtronic manufacturers and designs radio frequency, microwave and millimeter technologies. Its products, which include communication models, amplifiers, filters and transceivers are used across a range of industries such as defense, telecom and aerospace to allow strong reception and signal transmission.

In FY24, the company reported strong results with revenue reaching £24.4 million, up 56% year—over—year and an operating profit of £3.6 million, up 1423% from the previous year. This robust performance has continued into FY25 where its order intake has surpassed expectations and is anticipated to exceed the already upgraded market expectations.

Filtronic’s ROE stands at 23.84% and it’s operating margin has increased by 12% year—over—year, which indicates that the stock has growth potential.

Babcock International (LON: BAB)

Babcock International is a security, defense and aerospace company based in the UK. It operates worldwide across 4 main areas: Nuclear (Submarines and engineering services), Marine (marine infrastructure and naval ships), Aviation (Piolot training and equipment support) and Land (vehicle fleet management and training).

In FY24 the company reported robust results with revenue remaining stable year—over—year at £4390 million and underlying operating profit increasing by 33% to £238 million.

The company has a P/E growth ratio of 0.03 and an ROE of 43.29% which indicates good growth potential.

Our analysts have given the stock a buy rating with an average price target of 673p in the next 12—month period, up 34% from its current value.

Top value stocks

Card Factory

Retail company Card Factory reported a strong performance over the Christmas period with total sales increasing by 4.7% in November and December due to a higher basket value. Although an increase in the National Living Wage and employer National Insurance will rise costs by up to $14 million, the company remain on track to deliver its full year guidance whilst seeing continued sales growth in a difficult economic environment.

Card Factory has a P/E ratio of 6.57, which is below the industry average of 12.77. Its P/B ratio is 1.04. These fundamentals indicate that the stock is undervalued relative to its assets and its stock price could increase in the coming months.

Our analysts have given the stock a strong buy rating with an average predicted upside of 78% over the next 12—month period.

How to invest or trade in UK shares with us

1. Learn more about UK shares
2. Decide whether you want to trade or invest
3. Open an account with us or practise on a demo
4. Search for your chosen share on our web platform or app
5. Make your investment or trade

When you invest in shares you buy them outright and become a partial owner of a company with the view of building wealth over time.

Trading takes a shorter—term approach which involves leverage. This allows you to take a position that’s larger than your initial deposit so both profit and losses are magnified.

For example, if you trade with 5:1 leverage, you could manage a £5000 position by placing a £1000 deposit. A 10% market shift could result in 50% profit or loss on your initial margin.

Although negative balance protection stops you from losing more than your initial deposit, market movements are unpredictable, and you could still lose your full deposit.

Top shares to watch summed up

The above five companies are just a small selection of top stocks to watch. Remember that any company can also fail and always do your own research.

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, October 2021).