HomebuilderPersimmon(LSE: PSN) announced its results for the first half of the year today, and the figures were better than expected.
For the six months to the end of June, Persimmons profit-before-tax increased 31% to 273m. Revenue increased 11% to 1.3bn and underlying basic earnings per share jumped 43% to 78.6p. The number of homes sold by the company during the period increased 7% year-on-year to6,855. The average selling price achieve by the company during the first six months of the year grew by 4% to194,378.
Whats more, alongside Persimmons impressive headline figures, the company reported an impressive improvement in all of its underlying business performance metrics. Return on capital employed a key measure of profitability compared to assets increased by a third to 27.5%, and free cash generated by Persimmon during the first six months of the year rose 57% to 191m. The company ended the half with a net cash balance of 278m.
Still, despite Persimmons impressive set of performance figures, it is managements outlook for the rest of the year that has really excited investors.
Bright outlook
Persimmons chief executiveJeff Fairburn announced alongside todays results that Persimmon sees agood autumn selling season ahead, andlenders are increasingly competing for greater number of customers, which is likely to fuel demand forhousebuilding in the coming months. This is great news, not just for Persimmon but also for the likes ofBovis Homes(LSE: BVS),Berkeley(LSE: BKG) andBarratt Developments(LSE: BDEV).
However, Bovis,Berkeley, Barratt Developments andPersimmon are all currently trading at or near 52-week and five-year highs, which could put some investors off. But with further housing market growth expected, these companies donot seem overpriced to me at present levels.
Time to buy?
City analysts currently expect Persimmons earnings per share to jump 17% this year, although these forecasts havent been adjusted to reflect todays figures. Still, based on historic figures, Persimmon is currently trading at an undemanding forward P/E of 14.5.
Indeed, after factoring in Persimmons earnings growth rate of 17%, the companys shares are trading at a PEG ratio of 0.8 implying that the shares offer growth at a reasonable price. Also, Persimmons shares are set to support a dividend yield of 4.7% this year.
Similarly, Barratt and Bovis both trade at PEG ratios of less than 0.5. For example, Barratts earnings per share are set to jump 43% higher this year. The company currently trades at a forward P/E of 14.7 and offers a dividend yield of 3.8%. Bovis currently trades at a forward P/E of 11.9, a PEG ratio of 0.4 and supports a dividend yield of 3.4%. Unfortunately, Berkeleys earnings per share are projected to fall slightly this year. Nevertheless, a rebound is expected during 2017. Analysts havepencilledin earnings growth of 54% for 2017, which puts Berkeley on a 2017 P/E of 9.2.
And while City growth projections for these companies may seem optimistic, todays statement from Persimmons management leads me to believe that these firmsarelikely to meet or even exceed forecasts.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Berkeley Group Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
