Travis Perkins Share Price Analysis by Fat Prophets

Travis Perkins Share Price Analysis by Fat Prophets

  • Harry Atkins
  • 3rd September 2015, 15:05

**Building into value**

Despite the May general election in the UK the builders’ merchant Travis Perkins saw like-for-like sales hit 6.3% in Q2. This was up from the 5.1% in the first quarter and helped deliver strong first half results. With the valuation having come back to more reasonable levels our rating is buy.
Britain has been busy building with the construction PMI remaining well above 50 – the level that signals expansion. This backdrop is no surprise as construction is cyclical and so it tends to rebound as economic growth picks-up.
The three areas of construction are civil engineering, commercial construction and house building. Residential construction has picking up on the recovery in house building while commercial construction has benefited from rising office demand.
As of 15:12 BST, Thursday, 03 September, Travis Perkins plc share price is 2,027.00p.
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**Getting building with Travis Perkins**
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On a quarterly basis UK construction output growth was flat in the first quarter but came in at 0.2% in the second quarter according to the ONS. This may reflect greater confidence now the UK general election is out of the way.
Travis Perkins is well placed to benefit, as it owns the largest builders’ merchant in the UK through its namesake chain. The company business is cyclical due to its exposure to the construction sector but has delivered strong long-term returns.
The recent equity market sell-off has pushed the forecast 2016 P/E ratio for Travis Perkins down to 13.3X and the yield up to 2.8%. The forecast P/E falls to just over 10.5X by 2019 with a yield 3.8%.
As long as the UK recovery remains on track the valuation has started to become attractive. Travis Perkins is also focusing on reducing financial risk by lowering debt levels relative to profits and improving the fixed charge coverage.

By Harry Atkins
Harry joined us in 2019 to lead our Editorial Team. Drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience in the finance sector encompasses work for high street and investment banks, insurance companies and trading platforms.

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