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Taylor Wimpey Fundamentals (TW.)

Is this industry champion too cheap to ignore? - By Motley Fool | Mon, 8th August 2016 - 09:34

Shares in Taylor Wimpey (LSE:TW) crashed by more than 40% on the day after the Brexit vote, and while the shares have regained some of their losses over the past month, it still looks as if the company is undervalued compared to both its peers and the wider market.

Indeed, Taylor's shares currently trade at a forward P/E of 8.9. According to current City estimates the company's earnings per share are set to grow by 14% this year, indicating that the shares trade at a PEG ratio of 0.6. A PEG ratio of less than one implies that the shares offer growth at a reasonable price. Further, the wider FTSE 100 currently trades at a P/E ratio of 38.67 so compared to the UK's leading index, shares in Taylor look exceptionally cheap.

An attractive long-term investment

Even after Brexit Taylor remains an extremely attractive investment. The UK is facing a structural housing shortage and this deficit won't disappear following the country's decision to leave the EU.

The country needs hundreds of thousands of new houses every year, and Taylor is one of the few large homebuilders that can be relied on to contribute significantly to this growth. The Bank of England's decision to ease credit conditions further last week, lowering interest rates and increasing the volume of funds available for lending by banks, should only increase the demand for new homes.

In a trading statement published on 27 July, Taylor's management announced that one month after the EU referendum, trading conditions remained in line with normal seasonal patterns. In other words, it seems as if Taylor's sales are unlikely to be impacted by Brexit in the near term. For the first half of 2016 pre-tax profit increased 12.1%.

So overall, shares in Taylor look undervalued at current levels, and the company's trading performance is still going strong.

House prices pause for breath post-Brexit, say surveyors

The UK housing market paused for breath after the Brexit vote, but could take off again over the next 12 months, a poll of surveyors suggests.
The Royal Institution of Chartered Surveyors (Rics) survey showed house price rises slowed significantly in the three months to the end of July.
The surveyors said new buyer enquiries, home sales and new instructions all fell over the period.
The number reporting price increases dropped to its lowest in three years.
They outnumbered those seeing price falls by 5%, compared to 15% in June.
And the survey found prices had fallen outright in London, East Anglia, the North of England and the West Midlands.

'Rebound'
However, the Rics survey suggests that house price inflation could resume its upward path within a year.
A month ago - in the wake of the EU vote - surveyors were evenly divided about whether prices would rise or fall over the next 12 months.
Now a clear majority of them - 23% - expect prices to go up.
However, any such growth is likely to be modest compared to 2015, or the start of 2016, when prices were rising by up to 10% a year.

"It is not altogether surprising that near term activity measures remain relatively flat," said Rics chief economist Simon Rubinsohn.
"However, the rebound in the key twelve month indicators in the July survey suggests that confidence remains more resilient than might have been anticipated."

Inflation
Most surveyors responded to the questionnaire before the news came through last week that the Bank of England was cutting base rates by 0.25%.
Cheaper mortgages - if they happen on a significant scale - are likely to boost house prices.

The Halifax said last week that it was still too early to say how the Brexit vote would affect values.
However, its figures show that prices fell during the month of July by 1%.
Conversely, the Nationwide Building Society said prices rose by 0.5% during the month.
Annual house price inflation is running at 8.4% according to the Halifax, and 5.2% according to the Nationwide.

looking at the simpleton's chart below, it will be seen that for the last few sp has moved in a very narrow (and narrowing) channel between 25+50 dma
sooner or later this will be broken, and my guess would be to the north as houses are still desperately needed - as mentioned by many sources

Was hoping that momentum and volume trading would close the gap! Not to be.....yet.

It is interesting. Lately the pattern has been mostly price falls in the morning and then comes back in the afternoon. I take this as a buy the dips mentality which I see as excellent support for a move higher at some later stage

Agree CC, very similar to how the MGGT chart looked from the lows. Gaps always seem to be filled eventually.

House Prices

The average asking price for a house in the UK slipped 1.2% on month in August, property tracking
website Rightmove said on Monday - coming in at GBP304,222. That follows the 0.9% decline in July.

On a yearly basis, house prices advanced 4.1%, slowing from 4.5% in the previous month.
"Many prospective buyers take a summer break from home-hunting, and those who come to market at
this quieter time of year tend to price more aggressively," Rightmove Director Miles Shipside said.

Is it time to buy the housebuilders’ shares? - By Motley Fool | Mon, 22nd August 2016 - 13:47

Shares of UK-focused housebuilders such as Persimmon (LSE:PSN), Taylor Wimpey (LSE:TW) and Bovis Homes Group (LSE:BVS) continue their recovery today after falling earlier in the year.

Is this a bounce you should hop aboard or is more caution warranted?

Declining earnings

I'm cautious on the housebuilders and won't be rushing to buy their shares.

Looking back to the aftermath of the financial crisis, the housebuilders have travelled a long way in terms of rebuilding and growing their profits and in the way their share prices recovered from the depths that saw them trade with penny share status.

However, the halcyon days of double-digit growth in earnings year after year appear to be over -- at least for this wider economic cycle. City analysts following these three firms predict declines in earnings per share for 2017, Persimmon's to fall by 9%, Taylor Wimpey's by 6%, and Bovis Homes' by 6%.

The big advances as earnings recovered look done and forward growth seems set to become much harder for the housebuilders to achieve. Perhaps we're already seeing peak earnings for the sector in this wider macroeconomic cycle, despite a favourable interest rate environment and an ongoing need for further housing in Britain.

Downside risk

Affordability will likely act as a brake on demand at some point. House prices won't go up forever and people can't buy houses if they can't afford them, even if they need somewhere to live. Perhaps the ramifications of the process of Britain leaving the European Union will upset the balance of variables that has hitherto kept property prices rising. If it does, and property prices start to ease in a significant way, I can't see such a situation doing the housebuilding firms' profits and share prices any good whatsoever.

I think it's dangerous to flirt with out-and-out cyclical businesses after a long period of robust profits. When profits and share prices are elevated, as now, the risk to the downside for investors is at its most acute and the upside potential at its most limited. The stock market as a whole isn't as stupid as we might sometimes think. The market figured out cyclicality long ago and tries to mark down the valuations of cyclical firms as their profits rise in anticipation of the next cyclical down-leg.

Such valuation-compression will likely drag on investor total returns from here, so is it really worth flirting with the unknown location of the next cyclical plunge that could take away years of dividend gains in capital losses? I don't think so, especially when there are so many other less cyclical investment opportunities available on the London stock market paying more reliable dividends than the housebuilding companies right now.

The time to invest in uber-cyclical housebuilding firms is when their profits have vanished and their share prices are under the floorboards, such as in the immediate aftermath of the financial crisis. Right now, their businesses look far too healthy, so I'm avoiding them.

I'm staying long and waiting for the share price to get back in the 170 to 205 channel.

I think the dividend yield supports the price regardless of the economic and political dynamics.

Taylor Wimpey is steadily going down again. Now 140p.

Good stock to trade ,been in and out the last few weeks .

The rot has not even set in yet on Construction sector. Property prices are totally out of kilter with economic reality. Margins will be squeezed.

Your right there Claret ,,
(Property prices are totally out of kilter with economic reality),

however we are short of housing , the problem could be that it's becoming too expensive and at some point sales will slow.

despite your gloom, residential interest has perked up noticeably within the last month or so
my contacts in kent tell me houses at the lower end - ie say £230/250k - are being snapped up and elsewhere, properties at £1m+ are also getting interest

obviously location is everything (a true truism!) but a weak £ will also excite overseas investors

I have nowt against any of House builders per se. They have had decent hand thrown their way with open borders. IR screwed to the floor. Plus Govt help to buy. Knowing when to take profits is always the difficult one. We all know that who take aim on this site.

i have no trading positions in this sector, and long(er) term criteria are very different

Been a great trading stock over the last month or so.....

true jimmy...all that is to be done is buy on the dips and sell on the highs :-/

That's what i have been doing optomistic , just have not been greedy .

Taylor Wimpey, up 2.6%, Barratt Developments, up 2.6%, Persimmon, up 2.1%. Housebuilders were higher as the UK Department for Communities & Local Government said councils in England will be offered up to GBP18.0 million in new funding to speed up the construction of up to 8,000 homes on large developments.

The 'capacity fund' is designed to tackle planning issues that can hold up projects. "We want to turbo-charge house building on large sites to get the homes built in the places people want to live, so that this country works for everyone, not just the privileged few," Housing Minister Gavin Barwell said.