Yahoo Finance At UK£13.97, Is It Time To Put Persimmon Plc (LON:PSN) On Your Watch List?
Persimmon Plc (LON:PSN), is not the largest company out there, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Persimmon’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Persimmon
Is Persimmon Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 18.94% above our intrinsic value, which means if you buy Persimmon today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £11.75, there’s only an insignificant downside when the price falls to its real value. So, is there another chance 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 an opportunity to buy later on. 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. With profit expected to grow by a double-digit 11% over the next couple of years, the outlook is positive for Persimmon. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in PSN’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on PSN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Persimmon at this point in time. In terms of investment risks, we've identified 2 warning signs with Persimmon, and understanding them should be part of your investment process.
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.
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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.
