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Vistry turnaround shines through

The housebuilder has made solid progress against a three-year plan to boost margins and its return on capital employed
March 19, 2020

In the face of an uncertain macroeconomic outlook, the potential benefits of Vistry’s (VTY) turnaround efforts are more visible than ever. Nevertheless, the housebuilder has found itself in the eye of the coronavirus storm, with the shares losing more than half their value in under a month.

IC TIP: Buy at 788p
Tip style
Income
Risk rating
High
Timescale
Medium Term
Bull points

Rise in partnership revenue

Control of overheads

Growing operating margins

Improved build quality

Bear points

Threat of UK housing slowdown

Greater partnership development risk

The group, known as Bovis prior to its acquisition of Linden Homes for £1.1bn at the end of January, has spent the past three years improving build quality and implementing cost-saving initiatives, managing to grow operating margins over the past two years – in contrast to many other housebuilders. Strong cash conversion underpinned a generous annual dividend payment to shareholders, which was well covered by earnings. The group was one of only two to pass all of the eight tests under February's John Neff-inspired IC Alpha stock screen, which attempts to find stocks offering growth at a reasonable price, although a lot has changed about the outlook since then. 

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