The Persimmon (LSE: PSN) share price has been picking up in the past few weeks, but it’s still down more than 40% over the past five years.
In a trading update on AGM day Thursday (1 May), CEO Dean Finch spoke of “an improved private sales rate, an increase in average selling prices and further growth in our network of outlets.”
He told us forward private sales are up 17% on last year. And the company’s guidance for 11,000 to 11,500 completions this year remain unchanged.
There’s so far been no impact from “recent geopolitical uncertainty.” Though how President Trump’s trade wars might affect domestic home construction in the UK is unclear. I suspect possibly some threats to supply chains, and perhaps a weakening of sentiment from potential buyers who might postpone their planned purchases. We’ll have to wait and see on that one.
The share price reaction on the day? At the time of writing, it’s largely unmoved.
Development plots
Persimmon first came to my attention many years ago, during a past downturn in the property market. At the time, rather than reining in spending, the company was investing in building land when prices were down. That struck me as a sensible long-term strategy.
This time, Persimmon reports “good planning success with 2,781 plots achieving detailed or reserved matters approval in the first quarter.” That’s up from 1,457 in the same quarter a year ago. And again, to me it shows the company is using a weak spell in the market to build up its long-term ambitions.
Total land owned and under control amounted to approximately 83,800 plots at 31 March 2025, a bit above 2024’s 82,500. With annual completions expected at around the 11,000 mark, that strikes me as a solid bit of forward planning.
Investment case
I won’t buy any more Persimmon shares as I think I already have enough. But if I didn’t, I’d be seriously considering going for some. That’s largely down to what I see as an industry with pretty much unstoppable long-term momentum. And a short-term undervaluation.
The valuation might not be as attractive as it could be, with a forward price-to-earnings (P/E) ratio of 13.5 and a 4.6% dividend yield. But forecasts show both improving substantially in the next few years.
And a great company at a fair price rather than a fair company at a great price — that’s what billionaire investor Warren Buffett says we should want. I think we might just have one of those here.
Still pressure
We don’t know how many of the quarter’s reservations were rushed to get in ahead of April’s stamp duty rise. Mortgage approvals are still tough too, with inflation and interest rates stubbornly high. Still, better deals are increasingly appearing.
Economic uncertainty coupled with a valuation that suggests ‘fair but not screaming cheap’ means I could see more share price weakness for a while yet. But I’m holding firm for the long term.
