Here are two prime examples of such companies. They appear to offer strong growth potential within an industry that could benefit from a tailwind in future years. As such, they could be worth a closer look.

Improving performance

Reporting on Wednesday was UK homebuilder and regeneration specialist Countryside (LSE: CSP). Its full-year results showed a strong year of growth, with a 28% increase in completions and a 32% rise in revenue. The company’s reservation rate increased to 0.84 from 0.78 in the prior year, with a private average selling price of £430,000. Although the selling price was down on the previous year, this was in line with its strategic objectives. Overall, house price inflation of 5% shows that the housing market remains buoyant.

The company reported robust trading, with strong demand from owner occupiers. A record year-end forward order book of £242.4m shows that the company’s prospects appear to be bright. In fact, its bottom line is forecast to rise by 24% in the current financial year. This would be a sound performance in a growing sector.

Despite this, the stock trades on a price-to-earnings (P/E) ratio of just 9.9. This suggests that investors remain unsure about the outlook for the UK economy and for the housebuilding sector. For investors who can tie up capital for the long term, there could be a buying opportunity on offer.

Growth potential

Also offering upside potential within the housebuilding sector is Taylor Wimpey (LSE: TW). The company has enjoyed a prosperous 2017 thus far, with its shares rising by 27% since the start of the year. However, they continue to offer a wide margin of safety. For example, the stock trades on a P/E ratio of around 10 despite an upbeat growth outlook. In the current year it is expected to record a rise in its bottom line of 7%, followed by further growth of 9% next year.

Clearly, the UK economy faces an uncertain period. So far though, the housing market has remained robust and this may be because of demand-side policies such as Help to Buy. An extension of the government policy could lead to buoyant demand for new homes, while the scale of imbalance between demand and supply means that even a major housebuilding programme is unlikely to reduce the supply deficit in the medium term.

Therefore, Taylor Wimpey looks to have a bright future ahead of it. Certainly, volatility may be high as  government policies change and Brexit edges closer. But with a low valuation and high growth potential, it could be worth buying and holding for the next decade.

The post Two growth stocks I’d hold for the next decade appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The post goes on to reveal that his flagship Equity Income fund has increased its bias towards UK revenues to 55.5% from 41.9% two years ago and that UK revenues account for 68.3% of his more recently launched Income Focus fund.

Countryside Properties (LSE: CSP), which released a trading update today, is one of a number of new stocks he’s bought to play the contrarian opportunity in domestic cyclicals.

Well placed to deliver strong growth

In a placing in May, Woodford picked up 40.7m shares at 310p-a-pop, giving him a stake of 9.05% in the company. He bought more in June and July, taking his holding to 45.4m shares (10.08%).

Woodford and his team said: “Countryside is a well-managed property construction and development business which has a close relationship with the public sector, specialising in improving social housing. We see the company as extremely well placed to deliver strong growth.”

Countryside said in today’s update for its financial year ended 30 September that customer demand remained strong throughout the year, underpinned by low interest rates and the government’s Help to Buy scheme. Management added that an excellent pipeline of work and a record year-end forward order book give it “great confidence to deliver our medium-term plans.”

The shares are currently trading a tad higher on the day at 349p. This puts the company on 12.9 times expected earnings for the year just ended, falling to just 10.1 times forecast earnings for the year to September 2018. In addition to the low forward P/E, the price-to-earnings growth (PEG) ratio of 0.4 is deeply on the value side of the PEG fair-value marker of one. And a forecast dividend, yielding 3%, has considerable scope to increase in future as it’s covered an immense 3.3 times by earnings. The shares look cheap and eminently buyable to me.

Very appealing?

UK brick manufacturer Forterra (LSE: FORT) is another new stock Woodford has bought this year. He accumulated 34.4m shares during April, giving him a 17.17% stake in the company and increased it to 38.1m shares (19.03%) before the end of July.

Woodford and his team believe that after a period of consolidation in the UK industry and with the weakness of sterling making imports from Europe less economic, “the long-term prospects for Forterra now look very attractive. We believe the company is well-positioned to benefit from steady growth in the UK construction industry in the years ahead.”

Woodford thought the valuation of Forterra was “very appealing” when he was buying in April. However, the price was in the region of 200p then and is now not far short of 300p. Nevertheless, today’s rating of 12.5 times forecast earnings for the year to December, falling to 11.4 times next year, appears reasonably attractive. And with a PEG only a little above one and a dividend covered more than 2.5 times by earnings, giving a yield of 3.1%, rising to 3.5%, I’d put the stock in the cheap-to-fair value area.

The post These Neil Woodford stocks are selling cheap appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Homeserve announced that it had “a very good year” during the 12 months to March 2017 and that it expects to punch pre-tax profits at the upper end of current projections. City analysts have chalked-in profits of between £105m and £112m.

Euro-smash

Stock pickers have been piling in as the update has affirmed Homeserve’s bubbly outlook on both sides of the Atlantic.

In its UK marketplace — from where the company generates 43% of total revenues — Homeserve saw sales edge 1% higher during fiscal 2017, helped by robust retention rates around 80% and high income per customer.

And looking across the continent, Homeserve also announced that the number of customers on its books continued to swell in Spain and France last year. The emergency repairs business entered the Italian marketplace in March after linking up with Edison Energia, Italy’s third-biggest energy provider, to further bolster its European footprint.

Stateside star

However, it is Homeserve’s position in the US which is really making investors excited. The company now provides services to 50m households in the States via partner agreements, representing half of the group’s 100m global total. It sees big potential in the territory and eventually plans to have 80m homes on its books.

In addition, it has seen the number of North American direct customers rise to 3m as of March from 2.3m 12 months earlier. And the business has high hopes that the acquisition of Utility Services Partners in 2016 should keep driving client numbers.

The City certainly expects revenues to keep streaming in at Homeserve in the near term and beyond, and has consequently projected earnings expansion of 18% and 10% in 2018 and 2019 respectively.

Although a forward P/E ratio of 20.1 times appears a tad expensive on paper, I reckon Homeserve’s roaring progress on both sides of the Pond warrants such a premium.

Home comforts

I also believe a robust UK housing market sets Countryside Properties (LSE: CSP) up for exceptional earnings growth.

The abacus bashers have pencilled-in bottom-line expansion of 54% during the 12 months to September 2017, and further growth of 28% is anticipated for fiscal 2018. As such, Countryside currently sports a bargain-basement forward P/E ratio of 10.3 times.

It said in January: “While there remains some uncertainty over the Brexit transition, strong customer demand, low interest rates and continued government support give us great confidence that we remain firmly on track to deliver our medium-term growth targets.”

So while the results of June’s  EU referendum is likely to cool house price growth more immediately, I reckon a combination of strong demand and a lack of government action to address Britain’s housing shortage should keep earnings at Countryside and its peers rising long into the future.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Homeserve. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Impressive performance

Last week’s update by property investment and development company Great Portland Estates (LSE: GPOR) showed trading conditions are somewhat mixed. While it was able to produce a strong quarter of activity, which included continued leasing success and the crystallising of surpluses through capital recycling, it expects the London commercial property market to weaken in the short run.

However, this provides an opportunity for the business to benefit. Great Portland Estates has been a net seller of property in the last three years and this means it’s well-placed to benefit from lower prices. Furthermore, its investment portfolio is well let and materially de-risked. As such, its financial performance in the long run should improve. Trading on a price-to-earnings growth (PEG) ratio of 1.4, it could prove to be a sound long-term buy.

High yield, good value play

Further good news for the UK property market came last week via the Kier Group (LSE: KIE) update. The construction company stated that all of its divisions are performing well and it’s on target to meet full-year expectations. Notably, it has a sound property pipeline and a solid forward sold position within the Residential division. As such, it appears to be well-placed to deliver impressive results over the medium term.

As with Great Portland Estates, Kier offers a wide margin of safety. It trades on a PEG ratio of just 1.1, while its income prospects remain sound. It currently yields 4.9% from a dividend which is covered 1.6 times by profit. As such, there’s scope for a higher dividend in future years, which makes it a relatively appealing income stock despite the risk posed by Brexit for the wider UK property market.

Sales price growth

Also reporting at the end of last week was Countryside Properties (LSE: CSP). The housebuilder and urban regeneration specialist saw underlying sales price growth of 4% to an average selling price of £443,000. When combined with a rise in completions of 23%, this shows the housing market remains buoyant. Furthermore, Countryside has a record forward order book, which has risen by 76% in the last year.

Looking ahead, Countryside is expected to record a rise in its earnings of 53% this year, followed by further growth of 27% next year. This puts it on a PEG ratio of 0.3. As such, even if inflation rises and mortgage affordability falls, its shares could still perform well. They have a wide margin of safety and while the outlook for UK property remains uncertain, they seem to be worth buying alongside Kier and Great Portland Estates.

The post 3 reasons to be bullish on UK property in 2017? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Prices still rising 

Countryside Properties (LSE: CSP) is just one of the UK’s homebuilders struggling to keep up with demand. 

Shares in Countryside are rising today after it announced a record performance for the year to September 30. Specifically, during the reported period the firm’s average selling price rose to £466,000 per home, up from £385,000 last year. Total completions rose 12% year-on-year to 2,657 units and the company ended the year with a record private forward order book of £225.4m, up 64% year-on-year.

Further, at the end of September Countryside carried £12m of net cash on its books, an improvement of £71.5m from the net debt position of £59.5m reported at the same time last year. 

Compared to peers such as Persimmon (LSE: PSN), Countryside is a premium property company that targets the higher end of the market. This has both drawbacks and advantages. During its last financial year, the group’s private housebuilding arm saw total completions rise 28% to 703, with average selling prices up 14% to £667,000 thanks to soaring prices in London commuter markets. Average selling prices were pulled down by the public sector partnerships division but the average selling price in this unit stil rose by a sharp 27% to £307,000. 

High-end home sales are usually the first to come under pressure in any property slowdown, but Countryside’s partnership work should keep the company chugging along through any market turbulence. Management sees plenty of opportunity in this market and is eyeing major potential to work in partnership with local authorities and housing associations.

Exposure to London could be damaging 

Unfortunately, City analysts are worried about Countryside’s exposure to the London property market and therefore prefer Persimmon. For example, analysts at JP Morgan told clients last month that in comparison to Countryside, Persimmon has “little exposure to London” with a long land bank “to run down” meaning the firm’s dividend is safe “in almost any scenario.” Shares in Persimmon currently support a dividend yield of 6.3%, above the market average and extremely attractive in today’s low-interest rate world.

As of yet, Countryside doesn’t offer shareholders a dividend payout, but dividends aside, JP Morgan’s analysis raises an interesting point that housebuilders with little exposure to London are more insulated from any market slowdown than those with a London focus. For this reason, and after taking into account the dividend argument above, I believe Persimmon is a better investment than Countryside. 

The post Is Countryside Properties plc a better buy than Persimmon plc? appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.