Should You Buy Persimmon plc, Topps Tiles Plc Or Galliford Try plc For Housing Market Exposure?

Persimmon plc (LON:PSN), Topps Tiles Plc (LON:TPT) and Galliford Try plc (LON:GFRD) all look interesting — which should you buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Is the UK housing market still in rude health? Three companies whose fortunes are closely linked to housing are Persimmon (LSE: PSN), Topps Tiles (LSE: TPT) and Galliford Try (LSE: GFRD), all of whom issued trading updates today.

Good news?

Persimmon said that legal completions on houses sold rose by 17% to 13,509 in 2014, while the average selling price per house rose by 5% to £190,500. As a result, full-year revenues for 2014 rose to £2.6bn, a 23% increase on 2013.

Construction firm and housebuilder Galliford Try was similarly bullish. The group reported that completions rose to 1,529 units during the first half of its financial year, a 12.5% increase on the same period last year. Average selling prices also edged higher, rising by 1.6% to £259,000.

Meanwhile, tile retailer Topps Tiles reported a 6% rise in like-for-like sales during the first quarter of its financial year, suggesting that home improvement demand remains healthy.

Clouds on the horizon?

However, despite all three firms releasing apparently strong figures, there were some signs that the market might be slowing. Topps’ 6% sales growth is 50% lower than the 9.3% gain in like-for-like sales the company reported during the first quarter of last year.

Persimmon’s statement also suggested a return to more normal levels of growth.

The housebuilder commented that it saw “a return to a more traditional seasonal pattern to customer activity” in 2014. Translated, this means that it saw seasonal peaks and dips in sales, rather than surging demand throughout the year.

Greg Fitzgerald, chairman of Galliford Try, echoed these comments, telling investors that housing market growth has now “moderated to a more normal and sustainable level”.

Which stock should you buy?

House price forecasts for 2015 are very mixed, but most seem to suggest that house prices won’t change much in 2015, which could also lead to flatter sales volumes.

Against this backdrop, my pick would be Galliford Try, which offers more diverse exposure to the UK economy than Persimmon or Topps: in addition to its housebuilding arm, Galliford has a non-housing construction business with an order book that’s risen from £1.75bn to £3.2bn over the last year.

Galliford currently trades on 13 times historic earnings and 10.5 times forecast earnings, with a prospective yield of 5.5%. Overall, this looks reasonable to me, and if the UK economy continues to recover, I believe Galliford should perform well over the next couple of years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »