Yahoo Finance Is Persimmon Plc (LON:PSN) Potentially Undervalued?
Persimmon Plc (LON:PSN), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the LSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Persimmon’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Persimmon
What Is Persimmon Worth?
According to my valuation model, the stock is currently overvalued by about 24%, trading at UK£14.36 compared to my intrinsic value of £11.55. This means that the opportunity to buy Persimmon at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Persimmon’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Persimmon look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Persimmon, at least in the near future.
What This Means For You
Are you a shareholder? If you believe PSN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on PSN for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 3 warning signs for Persimmon you should be aware of.
If you are no longer interested in Persimmon, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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