Why I’d buy and hold long-term growth stock Purplebricks Group plc forever

Purplebricks Group plc (LON: PURP) could offer excellent value for money.

| 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.

Despite rising by 235% since the start of the year, there could be further capital growth ahead for online estate agency Purplebricks (LSE: PURP). The company has a sound business model which is becoming increasingly popular among consumers. It may also enjoy a tailwind from rising house prices. While its valuation may be rather expensive, the company could be a worthwhile buy for the long term.

A changing market

The housing market is undergoing a major change at the present time. The days of paying estate agents a percentage of the sale price of a house may be numbered, with many companies now offering low-cost fees in return for an online-focused presence. This means they offer a similar amount of online exposure to potential buyers as traditional estate agencies, as well as a local property expert to guide the seller through the process.

The popularity of such services is growing, with Purplebricks being one of the leading operators in this area. As online-focused estate agency services gradually become more mainstream, the company could experience a tailwind due in part to its dominant position within the industry. This may act as a catalyst on its financial performance and share price over a multi-year period.

Growing market

While house prices have fallen marginally in value this year, their outlook in the long run remains relatively positive. High demand plus a limited supply of new houses means there is likely to be a supply/demand imbalance for some time to come. This should mean that the average time it takes to sell a house remains somewhat limited. This could persuade more sellers that they do not require a traditional estate agency service, but rather can take a risk by using a cheaper alternative such as Purplebricks.

Certainly, Purplebricks may not be a cheap stock to buy at the present time. For example, it has a forward price-to-earnings (P/E) ratio of 223. But with significant growth potential, it could gradually begin to justify its valuation in the long run.

A further opportunity

Also offering upside potential within the property sector is Belvoir Lettings (LSE: BLV). The UK’s largest property franchise reported on Thursday that it has acquired Brook Financial Services for a total consideration of £2m. Of the amount, £1.5m will be paid in cash, while the remaining £0.5m will be paid for in new shares in the company. The acquisition is expected to be immediately earnings accretive and could help to better position the company within the mortgage marketplace.

Looking ahead, Belvoir is expected to deliver earnings growth of 18% this year and a further 10% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 1.1, which suggests they could offer capital growth potential. With trading in line with expectations and a sound strategy despite a management reshuffle, now could be the right time to buy a slice of the business.

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.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Is it madness to buy Palantir shares after Q3 earnings?

Palantir stock's surging again after the firm's Q3 earnings report. But after a 150% gain, is it too late to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£6,000 in savings? Here’s how I’d aim to turn that into £1,032 a month of passive income!

A small investment in high-dividend-paying stocks with the returns used to buy more shares can generate big passive income over…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

As Lloyds’ share price tumbles 14%, is this an unmissable opportunity for me to buy at a bargain-basement price?

The Lloyds share price is substantially below its year high, but decent earnings prospects should drive its price and dividend…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 UK shares that could rise if Trump wins the Presidential election

These UK shares are among the FTSE 100's most popular stocks. And they could rise in value if Donald Trump…

Read more »

Closeup ruffled American flag representing US stocks and shares
Investing Articles

2 UK stocks that could rise if Harris wins the Presidential election

Royston Wild believes these UK stocks could receive a bump if Kalama Harris wins the Presidency, giving their share prices…

Read more »

Investing Articles

After a 96% plunge, is buying more Aston Martin shares throwing good money after bad?

Just two weeks after buying Aston Martin shares Harvey Jones found himself nursing a painful loss. Yet after recent news…

Read more »

Investing Articles

After crashing 45% in October, should I buy this FTSE 250 share for my Stocks and Shares ISA?

Roland Head explains why he’s tempted to add this risky FTSE 250 turnaround share to his Stocks and Shares ISA…

Read more »

Investing Articles

Could I use a stock market crash to turn £20k into half a mil in just over a decade?

A stock market crash might sound terrifying to some but it can also present a once-in-a-lifetime opportunity to accumulate generational…

Read more »