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Can Bovis the Builder do it? - Yes, it Can.

By Malcolm Stacey | Wednesday 7 June 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Hello Share Swiggers. Not long to go before we find out who’s going to boss us about for the next five years. But whichever party wins, they have promised to increase housing stock.

Which continues to give me confidence that most British house builders will reap the benefit of financial encouragement to get on with it. Despite recent falls in house prices, supply continues to fall behind demand. This of course is one of the best situations to build up your profit.

One of my favourite builders, though I hold no shares at the mo, is Bovis Homes (BVS). At least one big bank agrees with me that Bovis is a buy, both for its likelihood for the share price to rise and a tasty dividend policy. The latest yield forecast is 4.8%. Another reason to look on Bovis favourably is that the P/E ratio I have is only 10.3.

As you might expect, a house builder of this size is a big cash generator. And like all big firms nowadays, the Tory austerity policies have chivvied Bovis into cutting costs, which increases profit ratios in relation to revenue.

Bovis has acknowledged that 2016 was a ’difficult year’. Gross profit was less than 1.5% better than the year before - and falling house prices are rightly a concern of Uncle Tom. So they must certainly be factored into my optimistic forecasts for Bovis. But where the prices are falling most - London - the company does not build.

Yet most of its building does fall into southern and midlands regions and we should remember that house prices are at their lowest in the grim north. Not all home builders are putting on share price these days, though I think they are being underestimated, but Bovis is. I expect that happy performance to continue.

As I’ve been saying in the Punter’s Return.


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