The Persimmon (LSE: PSN) share price was on the front foot this morning (8 August). That’s despite the company posting a fall in profit for the first half of 2024.
Look beyond this however, and I reckon there’s a lot for shareholders to be optimistic about.
Top end of guidance
Let’s get that negative out of the way, shall we? Reported pre-tax profit for the six months to the end of June came in at £146.3m, slightly down on the £151m achieved a year earlier. But I reckon this is still impressive given the economic headwinds that housebuilders have collectively faced in recent years.
On a more positive note, revenue was 11% higher at £1.32bn, helped by a slight rise in the average new home selling price to £263,288.
The number of home completions also hit 4,445 with the company saying it was now targeting 10,500 for the full year. That’s at the top end of previous guidance — just the sort of thing investors like me want to hear.
More to come?
Although it pays to keep my expectations in check with any stock in the short term, I can’t help but feel increasingly positive about my holding in Persimmon and the housing market in general.
Whether it will be able to hit its target of building 1.5 million homes in the next five years or not, the new government’s desire to revise the planning laws has been embraced by the sector and something the company clearly wants to capitalise on. A total of £195m was spent on land in the first half of the year. The landbank now stands at 81,545 plots.
The arrival of Keir Starmer and Co also seems to have helped demand too. Since the start of July, the net private sales rate has been 0.69. That’s a jump of nearly 70% on the previous year. The private order book was up 28% to £1.12bn.
Throw in that first interest rate cut at the beginning of August and things seem to be falling into place for a robust and sustained rebound.
Bias aside, it looks like my patience — I first started buying about 18 months ago — is starting to pay off.
All in the price?
Or maybe I’m getting ahead of myself. Having climbed nearly 40% in the last 12 months (and 15% year-to-date), it can be argued that a lot of good news is priced in. Persimmon stock already changed hands for nearly 19 times forecast earnings prior to markets opening this morning. That doesn’t scream value. To really move the dial from here, expectations might need to be surpassed.
A slight rebound in UK inflation may also keep the share price in check for a while longer. Indeed, the former could push the Bank of England to delay any additional interest rate cuts for now, thus taking any initial fizz out of the property market.
One consolation is that I should receive dividends in the interim, even if these are a lot less than they used to be following a big reduction in 2022. Analysts have the company yielding just under 4%.
Taking all of the above into account, I’m happy to remain invested. Any slight wobble in the following few months and I’d be tempted to buy more.
