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Is Wolseley plc now a ‘sell’ after hitting an all-time high?

Shares in Wolseley (LSE: WOS) are pushing higher this morning after the company reported a trading profit of £515m for the half-year to January 31, up 5% year-on-year at constant exchange rates.

The heating and plumbing group also announced this morning that it is planning to change its name to Ferguson PLC and exit operations in the Nordic regions.

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Management has decided to change Wolseley’s name as the group’s Ferguson business now accounts for 84% of trading profits. Therefore it makes sense to rename the company after its largest operating division.

Further growth ahead? 

Wolseley, which announced plans last month to merge Tobler, its Swiss plumbing and heating business, with Walter Meier, has been on a tremendous run over the past five years. Shares in the group have risen 95% excluding dividends, and it looks as if investors and City analysts are expecting this performance to continue. 

At the time of writing shares in the company trade at a forward P/E of 16.7 and analysts have pencilled in earnings per share growth of 19% the year ending 31 July 2017. 

Today’s trading update from the firm confirms that the group is on track to hit these forecasts for the year. After the first half’s impressive trading performance, since the end of the period, like-for-like revenue growth has been about 4.5% for the group as a whole and 5.5% in the USA. In fact, some analysts have already pointed out that Wolseley is already running slightly ahead of their forecasts for the first half, so I would be surprised if analysts upgraded forecasts for growth in the near future.

Today’s upbeat trading update has sent shares in Wolseley to a new all-time high. The question is, does this mean the shares are now a ‘sell’ or is there still time to buy? 

Time to sell?

Shares in Wolseley have continually printed new all-time highs since the financial crisis and, so far, the company has repeatedly allayed all concerns about its ability to chalk up further growth. 

I believe there could be further gains ahead for the company as it continues to acquire smaller businesses and build its presence in the US, where the market is still highly fragmented. What’s more, with economic growth picking up around the world, the company set to benefit from increasing building activity.

City analysts have pencilled in earnings per share growth of 9% for the year ending 31 July 2018 and analysts expect the group to report a pre-tax profit of £1.1bn for the period, up 450% in six years. If the group can repeat this performance, the shares still look exceptionally cheap compared to future growth.

Put simply, even though shares in Wolseley have printed a new all-time high today there’s no reason why the company cannot continue to grow and produce further returns for investors.

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Rupert Hargreaves 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.

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