The Taylor Wimpey share price rises on housing market ‘stability’. Time to consider buying?

The 2024 Taylor Wimpey share price hasn’t been in great form, so far. But Paul Summers remains cautiously optimistic for the rest of the year and beyond.

| More on:
A couple celebrating moving in to a new home

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 rose in early trading Tuesday (23 April) as the company implied that the housing market was slowly finding its feet.

Is this the ‘buy’ signal investors have been waiting for? Quite possibly.

Green shoots

Considering how tough it’s been for holders in recent years, I suspect many will be buoyed by today’s news, released to coincide with the firm’s annual general meeting. While a full-blown recovery may still be some way off, the tone of the update felt more upbeat.

Reflecting on a “good start” to the year, the company said recent trading had been in line with expectations and that it had seen “continued market stability” thanks to a more competitive mortgage market and confidence from buyers.

The headline numbers back this up. The net private sales rate for the year to 21 April (excluding bulk sales) was 0.69 per outlet per week. That’s a small increase on the previous financial year (0.66). The cancellation rate also fell, from 15% to 13%.

Reassuring news

As good as all this is, it’s the outlook investors are arguably most interested in. On this front, the news was reassuring rather than spectacular with the company continuing to expect between 9,500 and 10,000 completions in 2024 with a slight weighting to the second half of the year. Profit margin in the first half is likely to be reduced due to lower pricing and build cost inflation. Again, this was already expected.

Looking further ahead, CEO Jennie Daly said the company’s positioning itself for growth from next year, “assuming supportive market conditions“. Considering a lot can happen between now and then, I think that’s about as good as we can get.

So are the shares a bargain?

Before this morning’s announcement, Taylor Wimpey shares traded at a forecast price-to-earnings (P/E) ratio of nearly 16. That’s fairly average relative to the other housebuilders. However, it’s actually pretty expensive compared to the UK market as a whole. Seen purely from this perspective, this is far from a screaming buy.

However, it’s important to recognise that earnings projections can quickly change. A greater-than-anticipated first interest rate cut may cause analysts to frantically revisit their calculations. Of course, there’s always the risk that rate cuts come later than even the most pessimistic of predictions. In such a scenario, the share price could fall back.

Still, the dividend stream does look enticing. A possible 9.25p per share total return for FY24 gives a yield of almost 7%. This makes Taylor Wimpey one of the highest paying companies in the entire FTSE 100. The only snag is that profit’s barely expected to cover this payout. So a cut definitely can’t be ruled out.

I’m crossing my fingers

All told, I remain bullish on Taylor Wimpey shares and, indeed, the vast majority of companies operating in this sector. The ongoing demand for quality housing isn’t going away and this top-tier titan — backed with a solid landbank, order book and balance sheet — will surely play a major role in meeting it.

Since I already hold stock in peer Persimmon, I won’t be investing today. Instead, I’ll simply be crossing my fingers that the latter’s next update is similarly encouraging when it lands later this week.

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.

Paul Summers owns shares in Persimmon Plc. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Nvidia stock is becoming more affordable!

Nvidia stock is up 2,500% over five years, but the chip giant’s share split -- announced during its earnings report…

Read more »

Investing Articles

Are Rolls-Royce shares good for passive income?

Our writer is getting mixed messages about the Rolls-Royce dividend. But whatever happens, he thinks passive income hunters will be…

Read more »

Investing Articles

Could the Rolls-Royce share price end 2024 above £5?

As the Rolls-Royce share price continues its remarkable run, our writer considers where it might be at the end of…

Read more »

Investing Articles

UK stocks are hitting all-time highs! Yet these 2 still look cheap to me

The FTSE 100's on a roll. But it's still possible to pick bargain UK stocks, provided we know where to…

Read more »

Satellite on planet background
Investing Articles

At just under £14, can BAE Systems’ share price still be a prime FTSE 100 bargain? 

Despite its bullish price run, BAE Systems’ share price still looks undervalued to me and appears set for strong growth.

Read more »

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »