At £11.60, are Persimmon shares a steal? Here’s what the charts say!

Persimmon shares lifted this week after the firm posted a sharp drop in H1 profit. Dr James Fox takes a closer look at the FTSE 100 builder.

| 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.

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

Image source: Getty Images

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.

In its Thursday update, Persimmon (LSE:PSN) announced its confidence in aligning with projected full-year profit expectations. This is despite challenges like elevated mortgage rates, the cessation of the Help-to-Buy program, and considerable market volatility.

During the half-year assessment, the homebuilder highlighted substantial resilience in its top-line growth, excluding bulk sales. It referred to its growth as “robust“. This was reinforced by the improvement in private average selling prices, which was complemented by effective cost-saving measures.

With this, the share price ticked upwards slightly. The stock is now trading at £11.60, down 37% year on year. So, with this broadly positive outlook, is this a buying opportunity?


UK housebuilders currently trade at remarkably low multiples. This is a consequence of the exceptional performance during the 2021/22 period, which witnessed a substantial surge in house prices across the nation. This surge led to improved volumes and margins within the sector.

Yet, spanning the past 18 months, the industry has faced headwinds in the form of inflation and monetary tightening. This has led to a noticeable deceleration and subsequent decline in share prices.

Persimmon shares trade at around 4.5 times earnings on an adjusted basis, and 6.7 times on statutory. This reflects a discount versus industry peers, including Vistry, Barratt Development, and Redrow.

Created at TradingView

However, on the price-to-sales ratio, Persimmon appears more expensive. This suggests that Persimmon is more efficient at generating profits from revenue. In turn, we can observe that Persimmon may be achieving better margins than its peers.

Persimmon has traditionally been known to trade at a premium compared to some of its peers in the UK housebuilding industry due to its higher profit margins.

One of the factors contributing to Persimmon’s historically higher valuation is its business model, particularly its approach to land sales.

The FTSE 100 stock has been known for strategically managing its land bank and optimising land sales, which has positively impacted its profit margins and overall financial performance.

Created at TradingView


As emphasised by CEO Dean Finch on Thursday morning, the long-term demand for housing is likely robust. This need has become increasingly apparent over time, as the pace of housing supply struggles to match the consistently growing demand.

Various factors contribute to this upward trajectory in demand, including notable increases in life expectancy rates and a marked rise in the number of single-person households. The result is a distinctly pronounced scarcity in housing availability.

It’s simple, but positive appraisal on the outlook moving forward. Despite the current unfavourable backdrop for home buyers, and the impact of cost inflation on homebuilders, it seems likely that the industry will experience a significant uptick in time.

This makes Persimmon, a company well-positioned to deal with economic challenges, partially by virtue of its size, an attractive long-term investment. The stock, however, may not see upward pressure for some time. When considering the monetary value of time, some investors may see better prospects elsewhere.

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.

James Fox has positions in Vistry Group Plc. The Motley Fool UK has recommended Redrow Plc. 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

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

How I’d target a monthly £300 passive income from investing in dividend shares

Christopher Ruane walks through some of the practicalities of how he'd aim to generate passive income by investing in dividend…

Read more »

Investing Articles

If this event happens, I think the IAG share price could soar in 2024

Jon Smith explains why the IAG share price could be set for further gains if it decides to do one…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

These FTSE shares have fallen 20%+ in 2023. Are they no-brainer buys for 2024?

Edward Sheldon highlights three FTSE stocks that have tanked this year. Has the share price weakness in 2023 presented an…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £4 in 2024?

The Rolls-Royce share price has more than doubled so far this year. Our writer considers some possible reasons for it…

Read more »

Investing Articles

Why this FTSE 100 growth stock jumped 28% last month

Jon Smith explains why a new deal and changing views on future interest rates have helped one FTSE 100 stock…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

These dividend shares yield 11% and 8.6% and I think they look cheap!

With passive income on his mind, this Fool is targeting dividend shares for his portfolio. Here are two he likes…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the Lloyds share price hit 85p in 2024?

Morgan Stanley analysts say the Lloyds share price could reach 85p in 2024. But could a possible windfall tax throw…

Read more »

Older couple walking in park
Investing Articles

Here’s how I’d invest a £20,000 Stocks and Shares ISA to help build long-term wealth

This writer thinks a £20K Stocks and Shares ISA could be turned into something much, much bigger over time. Here's…

Read more »