Investors remain unconvinced by Persimmon‘s (LSE:PSN) credentials as a potential FTSE 100 recovery stock.
They are unmoved even after a largely impressive trading update on Wednesday (13 August). In it, the housebuilder said that “our average sales price, sales, completions, planning approvals, active sites and forward order book” all rose in the six months to June.
In fact, Persimmon’s share price dropped again following the release. It’s now down 6.3% in the year to date. Are investors missing a chance to snap up what could be an exceptional turnaround stock?
The recovery continues
The housebuilding industry’s post-2023 rebound has been bumpy at times. But supported by steady interest rate cuts, its upward momentum continues. Persimmon’s latest trading statement shows it remains firmly on the comeback trail.
It showed housing revenues up 12% in the six months to June. Total completions rose 4%, and average selling prices improved 8%.
Better sales volumes, married with self-help measures, pushed the company’s underlying operating margin 10 basis points higher. Underlying operating profit increased 13%.
The builder’s robust performance means it remains confident of a sustained recovery over the medium term. Completions are tipped to increase in 2025, to 11,000-11,500 from 10,664 last year, and again to 12,000 in 2026.
A full-year underlying operating margin of 14.2%-14.5% is also expected. That’s up from 14.1% in 2024.
So what’s occurring then?
Put simply, investors are considering the fragility of the housing market recovery. Given signs of stagnating economic growth and a deteriorating jobs market, I can hardly blame them.
Persimmon itself has warned of the threat of “geopolitical events and challenging market conditions, including uncertainty in advance of the Budget” in autumn.
Yet, tough economic conditions, rising living costs, and increased Stamp Duty haven’t derailed the industry’s recovery, so far. Latest Halifax data showed average home prices up 0.4% in July, the fastest rate of growth so far in 2025.
Persimmon also continues to ride high — net private sales rates were 0.61 in the five weeks from 30 June, up from 0.55 in the same 2024 period.
With further interest rate cuts tipped, and fierce competition among Britain’s lenders also helping buyer affordability, I’m confident the sector rebound can continue.
I’m not alone — Halifax’s head of mortgages Amanda Bryden expects “house prices to follow a steady path of modest gains through the rest of the year“.
A 45% return?
Given this supportive backdrop, City analysts think Persimmon’s share price can rebound sharply over the next 12 months. The average target among the 16 analysts with ratings on the housebuilder is £15.33 per share. That’s up a stunning 38.4% from current levels.
With the builder packing a huge 5.6% forward dividend yield, too, investors today might enjoy a total return just a shade below 45% over the next year.
Near-term challenges threaten Persimmon’s potential to be the FTSE 100’s best recovery stock. But given its strong operational progress and the likelihood of further interest rate reductions, I think it’s still a top UK share to consider.
