It’s uncommon to find an investment with a 12-month average price target of 45% upside across 10 analysts, but that’s exactly the situation right now with one of the best UK shares I know of, Prices (LSE:KNOS).

The strength of this opportunity is largely based on the company’s lower earnings growth relative to history. This has caused a vast price decline, leading to what I believe is significant undervaluation. However, given the likelihood of improved growth in 2025, I think vast gains are on the horizon.

Greedy when others are afraid

Investing is a counterintuitive business. When markets are going crazy, it’s often not the best time to buy stocks. Instead, I want low prices on great companies. In other words, as a value investor, I look for opportunities.

The reason this is so vital is that at a lower valuation, my returns are likely to be higher. As long as I buy at a turning point, i.e. when the company’s prospects appear to be improving.

Kainos currently trades at a price-to-earnings (P/E) ratio that is 41% below its 10-year median. Earnings per share are expected to grow faster, from an average annual rate of 8.1% over the past three years to 8.9% over the next three years.

When companies show stronger growth like this, investors often buy more shares, which can boost the P/E ratio. That means I could benefit not only from faster earnings growth but also from valuation appreciation.

Dangers of a Downtrend

Despite the opportunity, value investing isn’t always a straight path to wealth. Instead, when I buy low-cost stocks at a turning point, I often have to endure some losses before (and if) my future gains kick in.

It’s incredibly challenging to time the market. The best value investors don’t try to bet on when a company’s stock price will stop falling. Instead, they invest in a company’s financials and make sure it sells for less than it’s probably worth.

Kainos stock has fallen 55% in the past three years. While I don’t think the price will fall any further, I can’t guarantee it. Instead, I’ve assessed the company’s future growth prospects and believe it makes the most sense for me to invest in it now.

The benefits outweigh the risks

I always try to actively diversify my portfolio to protect myself from any downsides of a single investment. By owning 10 to 15 undervalued companies from different geographies and industries, I am well protected from risk.

I am still actively looking for the best stocks I can find though. Based on my research, Kainos is certainly one of the best UK tech investments on the market. Even with the growing capabilities of AI and automation potentially threatening its long-term market position, I am bullish on the company for now.

The stock is significantly undervalued, investor sentiment is set to change on improved growth rates in 2025, and my forecast is supported by a powerful analyst consensus of 45% growth in just 12 months.

What more could a foolish investor want? I’ll probably buy Kainos stock with the next cash I get.