Evaluating valuations across this cycle and the last suggests that a substantial upside in share prices remains available in the UK housebuilders, according to a new report by Jefferies Research. The firm reported: “Yield continues to provide the most conducive argument - benchmarking to FTSE offers scope up to a near doubling of share prices. Our preferred picks remain Persimmon, Countryside and Berkeley.
“Our in-depth long term valuation data across the UK housebuilders since 2000 highlights strong upside remains available across the sector, particularly in our preferred picks. Persimmon previously traded at a lower dividend yield reflecting the strength of its balance sheet and returns. Benchmarking to the lowest yield of the larger cap volume housebuilders suggests a 38% upside to the Persimmon share price.”
Jefferies added that it sees a potential upside of 37% for Countrywide and as much as a 50% upside for Berkeley.