Looking for the best FTSE 100 stocks to buy on the dip? I think Persimmon‘s (LSE:PSN) 33% share price slump over the last year makes it worth serious consideration from savvy investors.
Here’s why.
Big risks
Uncertainty still clouds the near-term outlook for the UK’s housebuilders. These notoriously cyclical stocks are vulnerable as the domestic economy struggles for growth and the jobs market deteriorates.
They’re also under threat as domestic inflation rises. The Organization for Economic Co-operation and Development (OECD) has predicted annual increases in the UK’s Consumer Price Index of 3.5% in 2025. That’s the highest rate among G7 nations.
It’s tipped to fall to 2.7% next year, but remains well above the 2% Bank of England target. In this climate, further interest rate cuts below today’s 4% may be limited, putting a drag on homebuyer affordability.
Amid these threats, then, it’s perhaps no surprise to see Persimmon’s share price fall back in 2025.
But market strength is reassuring
These risks merit serious consideration by investors. But enduring market strength in the face of these pressures mean any slowdown is by no means certain. To me, this suggests the housebuilders still demand consideration, even from short-term investors.
Indeed, latest Rightmove data showed average UK house prices rose a further 0.4% in September.
It’s worth noting City analysts expect Persimmon’s earnings to accelerate strongly over the short-to-medium term despite these risks. A 3% bottom-line increase for 2025 is tipped to improve to 14% next year. An even-better 16% increase is expected in 2027.
Of course, there are no guarantees Persimmon will hit these targets. But the Footsie builder’s strong first-half performance gives me some confidence as an investor.
Revenues and underlying operating profit rose 12% and 13% between January and June thanks to better selling prices and higher completions. Forward sales were also up 11% year on year.
Supportive factors like a competitive mortgage market and rapid population growth are driving Persimmon’s recovery from 2023’s lows. Looing ahead, the company’s plans to boost sales outlet numbers to 300 could support the healthy growth analysts are expecting (it had 277 in operation in the first half).
A FTSE 100 value stock
I think Persimmon’s shares are worth a close look, althought they’re not without risk, and especially at current prices of £11.22. Its price-to-book (P/B) ratio of one sits a long way below the long-term average of 1.9 times.
The company also offers attractive value compared to the broader UK blue-chip index of shares. A forward price-to-earnings (P/E) of 11.7 times sits below the broader FTSE 100 average of 12.4 times.
Investors can also grab a healthy 5.5% dividend yield right now. That’s more than two percentage points higher than the Footsie average.
For me, the potential rewards of owning Persimmon shares today outweigh the risks. I’m expecting it to deliver robust long-term returns as steady population growth drives demand for new homes.
