I’m going to take a look at a slightly smaller housing company today: Telford Homes plc (LON:TEF) (TEF.L). At the time of writing, its shares are trading at 394.75p with a PE ratio of 10.51 and a dividend yield of 3.98%. This seems fundamentally attractive in my view, so let’s look in greater detail at the company’s investment potential.
Telford released its results on 13 July and stated that it is on track to top £40 million of pre tax profit for the year to March 2018. It also predicted a £50 million profit for the year to March 2019.
This level of growth would push the PE down to 8.4 times for 2018 and 7.1 times for 2019 according to my calculations, which are excellent figures to my mind. The shares rose over 2% on the news.
Since it is building ‘rent to buy’ housing in London, I can see the demand increasing for such property. With London being the most expensive place to rent in the UK, this could lead to high profitability down the road in my view. Telford is certainly one for my watchlist and I would rate it as a ‘strong hold’ at the moment.
Another more established house builder is Bovis Homes Group plc (LON:BVS) (BVS.L). This mid-cap operator dropped 0.43% yesterday and is currently trading at 918p.
Again, the fundamentals are appealing to my mind, with a 10.22 PE and a 4.91% dividend yield. The share was trading around 970p a week ago so there has been quite a decline since then.
Looking at a six monthly chart of Bovis, I can see a relatively recent support level appears to be around 900p and the company could well be worth adding to my portfolio at this level. Director sales and purchases also indicate this with a large buy at 920p on 20 June. Dividend cover is ample as far as I can tell, with it coming in at 2 times earnings for 2016 and 2.38 times earnings for 2015.