Company in the news: Bellway
Bellway is a housebuilder that is doing well, says Phil Oakley. So should you buy the shares?
Britain's house builders have been riding the wave of another boom. Low interest rates and huge amounts of government support, such as the Help-to-Buy scheme have been kind to them over the last couple of years. But now the housing market is starting to cool.
Last week, Bellway (LSE: BWY)said that conditions were returning to more normal patterns. The company is doing well, with reservations slightly ahead of this time last year, and it's set for another good year of increased profits.
So how much better can things get for companies like Bellway? The company reckons its profit margins will be around 20% in 2015, which would be more than it was able to achieve during the last boom a decade ago.
Its share price is at similarly lofty levels. At 1,837p,it trades on nearly 1.7 times net asset value, which is very expensive compared to the past 20 years.
Profits could stay high for a while yet given that Bellway has been buying land at good prices. But one day, the housing market will head south again Bellway's shares don't reflect that risk.
Verdict: take profits