Should you buy Rightmove plc and Taylor Wimpey plc after today’s results?

There’s no sign of a property crash at Rightmove plc (LON: RMV) and Taylor Wimpey plc (LON: TW), says Harvey Jones.

| 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.

The property sector has been one of the hardest hit by Brexit, with housebuilder share prices hammered and investors rushing to flee open-ended property funds. Two property-related companies have published their results today, and the early signs are that once again, the post-referendum panic has been overdone.

Do the right thing

The UK’s leading property portal Rightmove (LSE: RMV) has released a positive set of first-half results, showing a 16% rise in revenues to £107.9m and underlying operating profits up 17% to 82.3m. Investors are celebrating an interim dividend of 19p, which is 3p higher than last year.

Referendum uncertainty hasn’t dented the British love of property portal surfing, with a 15% rise in visitors to 765m, while average revenue per advertiser hit a record £830 a month. Management admits the economic outlook is more uncertain than it was, but believes the site’s strong brand and dominant 77% market share leave it well placed to withstand the turmoil. Investors clearly agree, with the stock up 10% in early trading.

Move on up

At today’s 4,087p, Rightmove’s share price is still below its pre-referendum high of 4,225p, but well above its subsequent low of 3,173p. The stock has recovered strongly but as yet we don’t know the full impact of Brexit on the housing market. UK residential property may look pricey by traditional measures but with mortgage rates at record lows and likely to fall even lower, and demand still outweighing supply, the house price crash doom-mongers are likely to be proved wrong again. The only thing that concerns me is that the stock is expensive at 31.22 times earnings, and yields just 1.04%.

Taylor made

Housebuilder Taylor Wimpey (LSE: TW) also had a bad Brexit, its share price crashing from 192p to 115p on 24 June, a drop of 40% in a day. That was a great moment for bargain seekers as the stock is now back up at 151p, helped by a 5% rise after this morning’s half-year results.

Management says trading conditions have been normal since the referendum, while admitting the long-term impact is still impossible to gauge at this early stage. What we do know is that Taylor Wimpey completed 6,019 homes over the first half, with the average selling price up 5.8% to £238,000. Profits before tax rose 12.1% to £266.6m.

Far from Wimpey

Taylor Wimpey expects to reward shareholders with at least £150m in ordinary dividends each year – plus specials on top. It’s paying £300m this month and plans to do the same in July next year. This level of confidence is refreshing amid the overdone post-Brexit panic.

The company is also underpinned by strong housing market fundamentals, as the UK urgently needs new homes and mortgage rates may go lower still. Government first-time buyer schemes such as Help to Buy will also sustain the market, and new Chancellor Philip Hammond may have more stimulus up his sleeve. Better still, trading at 9.72 times earnings, Taylor Wimpey isn’t expensive, and its forecast yield of 7.6% will look even better if the Bank of England cuts interest rates next month.

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.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. 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

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »