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At near 1-year highs, are these 2 UK shares bargain buys for me?

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A house being constructed in the countryside
Image source: Getty Images.

The first UK share in question is the FTSE 250 property developer Bellway (LSE: BWY) and the second one is the building products’ distributor, SIG (LSE: SHI)

There is more than just the property sector that slots them together. A few days ago, both stocks touched one-year highs. The Bellway share price touched almost £35, an increase of 77% from a year ago. The SIG share price increased similarly, about 76%, touching 44p.

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As an investor, I now want to know if I should buy these stocks, or wait for their share prices to fall further. In other words, are they bargain buys or are their prices high?

I think there is much evidence to indicate that these UK shares could continue to see robust growth ahead. 

Consider this. 

Buoyant property sector

Even with some initial signs of cooling off, house prices in the UK are showing robust growth. As per the latest government data, they rose by 7.5% in January compared to the year before.

Supportive policies like the mortgage guarantee scheme and extension of the stamp duty holiday could keep the housing market going for much of this year. 

Additionally, the economic rebound due to occur as the lockdown ends by the middle of 2021 could fuel demand further. 

Both companies had a positive outlook in their recent updates. Bellway talked of a “robust forward sales position” earlier this week when it released its update for the half-year ending 31 January 2021. 

SIG expects a “return to profitability” in the second half of the year, as per its full-year 2020 results, also released earlier in the week. The company flipped into losses because of the hit from the initial period of the pandemic. 

Competitively priced UK shares

Also, despite the sharp increase in share prices, neither of these UK shares is particularly pricey compared to peers. For instance, Bellway, has an earnings ratio of around 22 times, which is comparable to that of another FTSE 250 builder, Vistry Group.

Similarly, SIG is competitive too, though the earnings ratio cannot be applied in this case because of its losses last year. I looked at price-to-sales instead, which is at 0.2 times for it compared to flooring products provider James Halstead at 4.5 times.

I think this indicates that their share prices can increase more. This will be particularly so as they inch back towards their pre-pandemic performance levels.

My concern

I do have one big concern about the property market though. At present, it is held up by policies, but once these are withdrawn, there may be a slump in the market. Strong order books indicate that their 2021 numbers may be less impacted, but the year after could look shaky again. 

What I’d do about these UK shares now

I guess we will have to wait and watch how things go. But there is much to be positive about too. Forecasters see a sharp economic rebound, which can negate any potential slump. I do like Bellway better than SIG right now, though. Not only has it performed better during the pandemic, I am saying this keeping SIG’s past performance in mind too. 

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Manika Premsingh 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.

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