It is interesting to see how the housbuilders have been bounding upwards over the the last 2 months. Much of it has been fuelled by the Persimmon takeover of Westbury. Also in the mix is the fact that the UK housing market is showing renewed signed of life, far from the crash that may have predicted over the last few years. The risk of a crash has been factored into the price of housebuilders and hence they have been on very low PEs compared to the wider market.

Improved conditions have led to share prices and PEs have been on the rise of late for all of the UK housebuilders expect Wimpey. It still appears to be stuck on a forward PE of around 6 while others in the sector have been boosted up to 7 or 8. And most startling is the Price to Book Value figure of 1.13. Based on current forecasts this ratio will drop below 1 when 2005 earnings are factored in. By my reckoning that makes them a bit of a takeover target. The only other UK house builder that has been on such a low rating was Westbury. Though WMPY are bigger and may be more difficult for a predator to swallow.

To me this one looks like a real anomoly, where there is little downside, but sizable potential upside if they move onto a similar rating to others in the sector.

I would be interested to what others have to say about it.