The uncertainty created by Brexit for the near-term and beyond has resulted in plenty of stock market casualties in recent times. After a bright start to 2019, Countryside Properties (LSE: CSP) has also finally succumbed to the pressure.
An 10% share price decline in the past month now leaves the homebuilder dealing on a forward P/E ratio of 7.5 times. This makes it too cheap to pass up in my opinion. In the infamous words of Theresa May: “Nothing has changed,” a statement that can be easily extended to Countryside and its peers.
Home price growth remains subdued, of course, reflecting the slowdown in the broader housing market. This means that the ripping earnings expansion seen in recent years at the homes creators is well and truly over.
That said, the capacity for the builders to keep generating chunky profits growth remains strong because of the mortgage rate wars underpinning buyer demand, and the shortage of available properties for them to snap up which is driving newbuild sales.
It keeps on trucking
The more favourable market conditions were underlined by Countryside last week during bubbly half-year results. The FTSE 250 firm said adjusted revenues rose 20% in the six months to March, a performance which helped adjusted operating profits boom 11% to £89.4m.
The construction colossus in particular paid tribute to “a strong second quarter with a net private reservation rate at the top of our target range,” a performance which helped the net reservation rate remain stable from the same period last year at 0.86.
It’s no wonder then that Countryside took the decision to boost build rates and to acquire Westleigh Homes to capitalise on the fertile trading environment — its forward order book stood 49% higher from March 2018, at £1.04bn.
Now Countryside isn’t having it all its own way and, reflecting the broader pressure on property prices in some parts of the UK, the average selling price of its homes fell £25,000 to £377,000 on the first half.
However, City brokers don’t reckon this will preclude the business from recording some substantial profits increases in the medium term at least, with current consensus forecasts suggestive of 12% earnings rises in both this year and next.
Surging dividend yields
Countryside isn’t a share that’s all about growth, either. As I’ve said, this particular company is a great buy for income chasers as well because of the rate at which it’s hiked dividends over the past few years. And it’s still at it, the interim dividend surging more than 40% year-on-year to 6p per share.
For the full year to September 2019, City analysts are predicting a dividend of 12.7p per share, up from 10.8p last year and yielding a fatty 4%. Things get even better for fiscal 2020 too, as the anticipated 13.8p payment yields 4.5%.
If you’re looking for the magical blend of growth and income, I reckon Countryside is hard to fault. And what’s more, it’s low, low valuation seals its position as a white hot buy, certainly in my opinion.