Will Shares In Persimmon plc Surge Higher Than Taylor Wimpey plc, Berkeley Group Holdings PLC, Bovis Homes Group plc And Barratt Developments Plc After 2016 Results?

Are shares in Persimmon plc (LON:PSN) (LSE:PSN.L) a better option than shares in Taylor Wimpey plc (LON:TW) (LSE:TW.L), Berkeley Group Holdings PLC (LON:BKG) (LSE:BKG.L), Bovis Homes Group plc (LON:BVS) (LSE:BVS.L) and Barratt Developments Plc (LON:BDEV) (LSE:BDEV.L)?

Persimmon plc
Persimmon plc

Persimmon plc’s (LON:PSN) (LSE:PSN.L) share price has risen 1.3% so far today after the release of its 2016 results to investors. The company has focused on disciplined high quality growth, which has meant a rise in underlying profit before tax of 23%. Its full year revenue moved 8% higher to £3.14 billion, while legal completions increased by 599 new homes to 15171. The average selling price was 3.8% higher at £206,765.

Persimmon’s shares may also benefit from a higher operating margin in my view. It increased to 24.8% from 21.9%, which in my opinion shows the company is becoming more efficient. Its cash generation rise of 41% may also please investors, while a return on average capital employed of 23% to 39.4% may also have a positive effect on its share price.

The underlying basic earnings per share for Persimmon increased 19% to 205.6p. Its strong performance in 2016 has enabled a rise in the Capital Return Plan. It will make an additional payment of 25p per share, increasing the total value of the plan by £77 million to £9.25 per Persimmon share.

In the last 3 months, shares in Persimmon have risen 20%. That’s ahead of the share prices of sector peers Taylor Wimpey plc (LON:TW) (LSE:TW.L), Berkeley Group Holdings PLC (LON:BKG) (LSE:BKG.L), Bovis Homes Group plc (LON:BVS) (LSE:BVS.L) and Barratt Developments Plc (LON:BDEV) (LSE:BDEV.L). Bovis is 6% lower after a profit warning, Taylor Wimpey and Berkeley are 19% higher, while Barratt shares are 9% up.

In my opinion, Persimmon’s shares have investment appeal for the long term. I think the housing market may struggle this year, which could affect Taylor Wimpey, Berkeley, Bovis and Barratt likewise. But in the long run I’m optimistic about it because of the lack of supply and continued high demand for houses. I like Persimmon’s strategy and its dividend per share increases announced today. Therefore, I think its shares could perform well in the long run versus the rest of the stock market.







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