Shares in major UK housebuilders have retreated from the peaks touched in February. That's because there was mounting concern that the Bank of England would move to stop the housing sector overheating. But has the correction been overdone? In the case of Bellway (BWY), whose shares have fallen 16 per cent from February's peak, we believe it has.
- Low rating against other builders
- High return on capital
- Virtually no debt
- Strong margin improvement
- Vulnerable to government intervention
- Cost pressures could accelerate
Using conventional valuation metrics against its rivals, Bellway is the cheapest on nearly every count. On broker Numis's estimates, the shares are trading on just 1.1 times net tangible assets for 2015 compared with Berkeley Group and Persimmon on nearly double that. Earnings growth is also pretty dramatic, too, because even though the shares have risen nearly fourfold from a trough of 378p six years ago, they are still on just seven times forecast earnings for 2015.