Should You Buy Persimmon plc, Topps Tiles Plc Or Galliford Try plc For Housing Market Exposure?

Persimmon plc (LON:PSN), Topps Tiles Plc (LON:TPT) and Galliford Try plc (LON:GFRD) all look interesting — which should you buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Is the UK housing market still in rude health? Three companies whose fortunes are closely linked to housing are Persimmon (LSE: PSN), Topps Tiles (LSE: TPT) and Galliford Try (LSE: GFRD), all of whom issued trading updates today.

Good news?

Persimmon said that legal completions on houses sold rose by 17% to 13,509 in 2014, while the average selling price per house rose by 5% to £190,500. As a result, full-year revenues for 2014 rose to £2.6bn, a 23% increase on 2013.

Construction firm and housebuilder Galliford Try was similarly bullish. The group reported that completions rose to 1,529 units during the first half of its financial year, a 12.5% increase on the same period last year. Average selling prices also edged higher, rising by 1.6% to £259,000.

Meanwhile, tile retailer Topps Tiles reported a 6% rise in like-for-like sales during the first quarter of its financial year, suggesting that home improvement demand remains healthy.

Clouds on the horizon?

However, despite all three firms releasing apparently strong figures, there were some signs that the market might be slowing. Topps’ 6% sales growth is 50% lower than the 9.3% gain in like-for-like sales the company reported during the first quarter of last year.

Persimmon’s statement also suggested a return to more normal levels of growth.

The housebuilder commented that it saw “a return to a more traditional seasonal pattern to customer activity” in 2014. Translated, this means that it saw seasonal peaks and dips in sales, rather than surging demand throughout the year.

Greg Fitzgerald, chairman of Galliford Try, echoed these comments, telling investors that housing market growth has now “moderated to a more normal and sustainable level”.

Which stock should you buy?

House price forecasts for 2015 are very mixed, but most seem to suggest that house prices won’t change much in 2015, which could also lead to flatter sales volumes.

Against this backdrop, my pick would be Galliford Try, which offers more diverse exposure to the UK economy than Persimmon or Topps: in addition to its housebuilding arm, Galliford has a non-housing construction business with an order book that’s risen from £1.75bn to £3.2bn over the last year.

Galliford currently trades on 13 times historic earnings and 10.5 times forecast earnings, with a prospective yield of 5.5%. Overall, this looks reasonable to me, and if the UK economy continues to recover, I believe Galliford should perform well over the next couple of years.

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.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »