Up 100%, is there anything holding Vistry Group shares back?

Vistry Group shares had a strong first half of the year, and this strength could be compounded by political developments. Can Vistry go higher?

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Vistry Group (LSE:VTY) shares are among the FTSE 100‘s best performers over the past 12 months. The stock has doubled in value.

And on Tuesday (9 July), Vistry Group issued a trading update that further highlighted the company’s positive trajectory.

So, is there anything holding it back? Spoiler alert: not really.

A positive trading update

Vistry reported strong performance in the first half of 2024, with a strategic focus leading to a projected 10%+ growth in completions for FY24.

The company’s sales rate during the period averaged 1.21. That’s up from 0.86 units in the first half of 2023.

Highlights from the first six months include a 10% rise in adjusted operating profit and an 8% increase in completions.

The Partnerships model — part of the business that delivers affordable/council housing — is outperforming the wider market, and the company expects over 18,000 completions for the year.

Management pointed to a strong forward sales position and new development opportunities. Lower building material costs and reduced net debt further strengthen their outlook.

Moreover, the company said it would be continuing its share buyback programme throughout the second half of the year.

Vistry has committed to returning £1bn of capital to shareholders over the next three years, representing a long-term uplift for the share price.

Labour and housing

Chancellor Rachel Reeves on Monday committed Labour to mandatory housing targets and said she would create a new taskforce “to accelerate stalled housing sites in our country“.

The new government aims to build 1.5m homes by the end of this parliament, including affordable and council homes.

Reeves also announced that the government would prioritise building on brownfield and ‘greybelt’ sites. The plans put Britain’s greenbelt (13% of land) at risk, but should provide developers with access to more attractive development sites.

For housebuilders, this stance signals potential growth opportunities, as supportive government policies could lead to increased demand and streamlined processes.

This also represents a shift from the Conservatives’ approach, which was focused on stimulating demand, and didn’t deliver on the targets promised.

I think it’s important to note here that Vistry could be the best-placed British housebuilder to respond to Labour’s housing objectives, given the size of its Partnerships business.

This is certainly something management has been keen to note.

Could anything hold it back?

The stock isn’t as cheap as it was two years ago. But this reflects the changing industry outlook over the period, from dire to quite optimistic.

One of the biggest concerns will be the valuation data. Vistry is currently trading at 15.4 times forward earnings, and I know that will put off some UK-focused investors.

However, growth forecasts are strong. The forward price-to-earnings (P/E) ratio falls to 12.6 times in 2025 and 11.1 times in 2026.

So, it’s a little more expensive than we’ve been used to, but Vistry is expected to grow earnings at an industry-topping pace.

The forward dividend yield is 3.8%.

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 Vistry Group 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.

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