The Purplebricks share price has fallen 50% in one year. Time to buy?

Does Purplebricks Group plc (LON: PURP) offer recovery potential after a tough year?

| 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.

It’s been a challenging year thus far for UK-focused shares. Fears surrounding the prospects for the economy have generally held back their performance, with investors becoming unsure about their prospects.

Online estate agency Purplebricks (LSE: PURP) has seen its share price decline by 50% in the last 12 months. A slowdown in the housing market has caused investors to become increasingly cautious despite the continued transition of the estate agency industry towards online.

After such a major fall, could the stock post a successful recovery? If so, is it worth buying alongside another property-related stock which released a positive update on Wednesday?

Improving performance

The company in question is developer and constructor of multi occupancy property assets Watkin Jones (LSE: WJG). It released a trading update which stated that its performance in the year to 30 September 2018 has been slightly ahead of expectations. It has been able to make progress on forward sold student accommodation developments, with it completing all 10 schemes that were scheduled for delivery in the period.

Demand among institutional investors has been strong, while its performance in the build-to-rent sector has been impressive. It has signed agreements for major developments in Reading and Wembley, while it has a stable development pipeline over the medium term.

With Watkin Jones trading on a price-to-earnings (P/E) ratio of 12.7, it seems to me to offer good value for money. Given that the stock is due to post a rise in earnings of over 10% in the current financial year, it could offer capital growth potential – especially since the build-to-rent sector is forecast to grow significantly in the coming years.

Growth potential

As mentioned, it’s been a difficult period for Purplebricks. A lack of activity in the housing market seems to be causing investors to become increasingly cautious about the company’s prospects. Although it is expanded internationally, the UK remains a key market for the business, and Brexit could lead to further challenges in the near term if consumer confidence remains weak.

While there could be further falls in the company’s valuation, its long-term potential remains high. The estate agency industry is undergoing a period of significant change which is likely to see an increase in the popularity of lower-cost, online options among house-sellers. As people become increasingly comfortable with using digital opportunities for areas such as retailing and communication, it seems likely that they will be more open to listing their home online.

With Purplebricks having a strong position in the online estate agency arena, it seems to be well-placed to capitalise on a possible tailwind over the coming years. And with the business due to move into profitability next year, investor sentiment could pick up to some degree over the medium term. While still a volatile and risky share to own, I think its growth potential seems to be high despite its share price fall over the last year.

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 of the 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

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »