Is Wolseley plc now a ‘sell’ after hitting an all-time high?

Could it be time to sell Wolseley plc (LON: WOS)?

| 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.

Shares in Wolseley (LSE: WOS) are pushing higher this morning after the company reported a trading profit of £515m for the half-year to January 31, up 5% year-on-year at constant exchange rates.

The heating and plumbing group also announced this morning that it is planning to change its name to Ferguson PLC and exit operations in the Nordic regions.

Management has decided to change Wolseley’s name as the group’s Ferguson business now accounts for 84% of trading profits. Therefore it makes sense to rename the company after its largest operating division.

Further growth ahead? 

Wolseley, which announced plans last month to merge Tobler, its Swiss plumbing and heating business, with Walter Meier, has been on a tremendous run over the past five years. Shares in the group have risen 95% excluding dividends, and it looks as if investors and City analysts are expecting this performance to continue. 

At the time of writing shares in the company trade at a forward P/E of 16.7 and analysts have pencilled in earnings per share growth of 19% the year ending 31 July 2017. 

Today’s trading update from the firm confirms that the group is on track to hit these forecasts for the year. After the first half’s impressive trading performance, since the end of the period, like-for-like revenue growth has been about 4.5% for the group as a whole and 5.5% in the USA. In fact, some analysts have already pointed out that Wolseley is already running slightly ahead of their forecasts for the first half, so I would be surprised if analysts upgraded forecasts for growth in the near future.

Today’s upbeat trading update has sent shares in Wolseley to a new all-time high. The question is, does this mean the shares are now a ‘sell’ or is there still time to buy? 

Time to sell?

Shares in Wolseley have continually printed new all-time highs since the financial crisis and, so far, the company has repeatedly allayed all concerns about its ability to chalk up further growth. 

I believe there could be further gains ahead for the company as it continues to acquire smaller businesses and build its presence in the US, where the market is still highly fragmented. What’s more, with economic growth picking up around the world, the company set to benefit from increasing building activity.

City analysts have pencilled in earnings per share growth of 9% for the year ending 31 July 2018 and analysts expect the group to report a pre-tax profit of £1.1bn for the period, up 450% in six years. If the group can repeat this performance, the shares still look exceptionally cheap compared to future growth.

Put simply, even though shares in Wolseley have printed a new all-time high today there’s no reason why the company cannot continue to grow and produce further returns for investors.

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 considered so you should consider taking independent financial advice.

Rupert Hargreaves 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

Modern suburban family houses with car on driveway
Investing Articles

Should I snap up Taylor Wimpey shares at £1.30?

With the Taylor Wimpey share price down by almost 30% this year, should I snap up some shares while it's…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m finding shares to buy now – and keep for a decade

Our writer has been looking for shares to buy using an approach that looks both at long-term profit prospects and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

What’s happening to the Petrofac (PFC) share price?

The Petrofac (LON:PFC) share price has had a seriously erratic year so far. I take a look at the latest…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

The Aviva share price is flying! Should I buy this 7% yield?

Despite recent gains, Roland Head thinks the Aviva share price could still be too cheap.

Read more »

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

Here’s 1 passive income opportunity not to be missed!

This Fool details a passive income opportunity that could bolster his holdings, and the shares trading at cheap levels too.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

The Legal & General share price is dirt-cheap with a juicy dividend yield!

Jabran Khan takes a closer look at the Legal & General share price which looks like an opportunity to boost…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

If I’d invested £1,000 in this top lithium stock 5 years ago, here’s how much I’d have now!

This lithium stock has gone from strength to strength over the past year. But has it flown too high, or…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A growth stock with a price-to-earnings ratio of just 9.7! Should I buy Yalla?

I'm generally not too keen on investing in dollar-demonated stocks at the moment. But Yalla, with its low price-to-earnings ratio,…

Read more »