What’s going on with the Taylor Wimpey share price?

After rising 39.6% over 12 months, the Taylor Wimpey share price pushed downwards despite strong profit guidance on Thursday 11 January.

| 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.

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

Image source: Getty Images

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.

The Taylor Wimpey (LSE:TW.) share price staged an impressive rally in the second half of 2023 despite continuing tough operating conditions.

The housebuilder stock rose 39.6% over the past 12 month, with much of that growth coming in the latter part of the year.

In fact, over six months, the stock is up 42.5%.

So, what’s going on with the Taylor Wimpey share price?

Interest rates are key

Higher interest rates pose challenges for housebuilders by increasing borrowing costs, reducing housing affordability for buyers, and potentially dampening demand. This can impact property prices, investor confidence, and project viability.

There are several further angles regarding how rising rates influence the market, but a year ago, some analysts were suggesting that we may see house prices drop by 20%. That certainly hasn’t happened.

So, from a macroeconomic perspective, we’ve seen several positive developments. As the year has gone on, the housing market has proven far more resilient than many expected, partially driven by the acute shortage of housing in the UK.

And interest rates have peaked while inflation appears to be moving in the right direction. Towards the latter part of 2023, traders started pricing in cuts to the Bank of England base rate, and this resulted in surging housebuilder prices.

Performing well

On 11 January, the housebuilder said that despite market uncertainties, management anticipated full-year profits would come in at the upper end of the £440m-£470m range.

The company reported 10,848 total completions in 2023, down from 14,154 in 2022, citing challenging market conditions.

The net private sales rate also decreased to 0.54 from 0.65 in 2022. However, private completion prices rose 5.1% to £370,000.

CEO Jennie Daly expressed her optimism amid lowering mortgage rates but acknowledged short-term uncertainty and planning challenges.

Despite a reduced order book at £1.77bn — which represents 6,999 homes, down from 7,499 at the end of 2022 — Taylor Wimpey remains confident in its strong position and the sector’s long-term fundamentals.

Good value?

Housebuilders have looked relatively inexpensive on a backward-looking earnings basis in recent years. That’s because 2021 and 2022 were strong years for housebuilders amid a post-pandemic boom.

So, how does Taylor Wimpey look on a forward earnings basis? Below I’ve listed the forecast earnings per share (EPS) for the next three years along with a price-to-earnings (P/E) ratio based on the current share price.

202320242025
EPS (p)9.559.2810.86
P/E15.515.913.6

There’s certainly an argument here that Taylor Wimpey isn’t looking overly cheap. And that’s despite its 6.33% dividend yield.

In the long run, I expect the industry to recover fully, I’m just not sure whether this is the right moment to buy, and whether there’s better value elsewhere. After all, I can find a host of companies with growth earnings growth and lower P/Es.

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 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

Growth Shares

3 wide-moat FTSE 100 stocks that offer value today

These FTSE 100 companies have some of the widest economic moats in the index. And right now, Edward Sheldon believes…

Read more »

Investing Articles

Yielding 10.6% after a 20% decline, are abrdn shares simply too cheap to ignore?

Buying a falling knife can be a risky strategy, but Andrew Mackie believes the abrdn share price decline might be…

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d aim to turn that into passive income of £994 a month

A Warren Buffett investment from 1994 returns 60% each year in dividends. With enough time, could Stephen Wright achieve a…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

If I’d put £20,000 into a FTSE 100 tracker a year ago, here’s what I’d have now

The FTSE 100 is having a great year so far this year, and it seems overdue. What's the best way…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

BP share price decline is presenting a gift for value investors

As the BP share price decline accelerates following disappointing earnings, this Fool’s long-term bullish stance has not changed.

Read more »

Investing Articles

1 S&P 500 company from my ‘best stocks to buy now’ list

Zaven Boyrazian explains why this cheap-looking S&P 500 growth enterprise is on his ‘best stocks to buy now’ list for…

Read more »

Investing Articles

Down 70%, is this former FTSE 100 name set to explode like the Rolls-Royce share price?

The Rolls-Royce share price has already flown, but Roland Head wonders if this famous FTSE 250 faller could be the…

Read more »

Black father and two young daughters dancing at home
Investing Articles

2 dividend stocks I’d buy for a lifetime of passive income

The London Stock Exchange is filled with lucrative dividend stocks waiting to be discovered. Here are two long-term winners on…

Read more »