Our 2017 Stock advances 'under the wire'

Thursday, 19th October 2017 15:01 - by David Harbage

Good to see Bellway shares put on 3% today, to extend yesterday's advance into record territory after announcing trading results which exceeded analysts' expectations. Financial media response - on a £4.5bn, near FTSE100 index company - has been conspicuous by its absence, (which is why the likes of yours truly has to 'speak up'!); for instance no mention in the Telegraph today and only a Hold recommendation in another of the broadsheets.

The latter's lack of rigour merits a mention, as the article suggested that the shares could only be a Retain - rather than a Purchase - because they had already performed strongly. To take such a view is not just school boy, but primary school boy logic. As you've heard this blog say before, the PE multiple (or a share's rating) is a product of two moving parts or factors: the share price and the earnings/profit expectation.

Inspecting the progression of both the share price and the consensual EPS forecast from the broking community over recent months, it can be seen that the stock has risen by more than 50% since the beginning of 2017 (to close at 3673p today) - while forecast EPS (396.25p for the year to 31 July 2018) has also risen strongly to keep the stock on a single digit earnings multiple (of 9.0 times).

The other naive comment in the Times' article surrounded the 'low' dividend as compared to peers. Earnings yield is more important, almost 12% in Bellway's case and, in any case, next year's anticipated 3.7% dividend (covered a little more than 3 times by earnings) is ahead of the overall UK equity market.

Bottom line, I am quite happy to see the Blog stock for 2017 published on lse.co.uk remaining 'under the radar'.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.