According to the British Bankers’ Association, mortgages from British banks dropped 16% to just over 37,000 in October, the lowest number since May.
But that hasn’t stopped shares in Barratt Developments (LSE: BDEV), Bellway (LSE: BWY) and Persimmon (LSE: PSN) from soaring to new 52-week highs.
Persimmon reached a peak of 1,520.5p today for a 12-month gain of 23%, Bellway shares are up 24% to 1,847p for its 52-week top, and Barratt has beaten them all with a 35% rise to a new high of 458p today.
A great 5 years
And over five years, the three shares have put in stunning performances, with Bellway up 146%, Persimmon up 250% and Barratt up 274%!
But despite all that, I reckon all three are still looking like bargains.
For Persimmon, consensus forecasts suggest earnings per share (EPS) rises of 43% and 23% for this year and next, and that comes on top of four years of very strong recovery after 2009’s low point. That gives us a P/E of just 12.6 for the year ending December 2014, dropping to a very low 10.3 on 2015 predictions. And at the same time, we’re looking at effective dividend yields forecast at 5.2% and 6.6%.
At Bellway there’s a similar track record of EPS growth, and with its financial year ending in July we already have 2014 figures showing a 76% rise. We have just one year forecast right now, and that suggests a 25% gain to put the shares on a P/E of just 9.3 — albeit with a lower dividend yield of 3.6%.
Finally, Barratt took a little longer to get back to health, recording pre-tax losses in 2010 and 2011. But since then it’s stormed back, more than doubling its EPS for the year to June 2014. And there’s another 38% on the cards for the current year, with a very nice 4.6% dividend yield indicated.
Are these growth expectations realistic?
Guidance is bullish
On the day of its AGM on 12 November, Barratt told us it is “on track to deliver our target of 15,000 completions” for 2015, and that’s after a 2014 completions reached their highest level in six years.
Bellway, meanwhile, completed 21% more homes in the year to July, and expects a further 10% volume growth in the current year.
And in its 4 November Q3 update, Persimmon said it’s fully sold up for the rest of 2014, with around £696m of forward reservations beyond that — and that’s 12% up from the same stage last year.
All in all, I see three success stories with a good bit more to come.