PersimmonThe price of shares (LSE: PSN) fell by 19% of October 16 of the annual highest level of 17.21 £.

This does not necessarily mean that this is an opportunity. It may happen that the basic business is simply worth than before.

However, it may happen that the market did not take into account the share price of the company’s real value.

I immersed myself deeply in the activities of Persimmon and his price to find out what is here.

What does the basic business look like?

For a long time, British house builders stood in the face of powerful winds that hindered progress.

Pandemic mutilated demand, followed by spiral interest rates to 16-year-old Maksima kept low. The resulting enhance in the cost of living was additionally hindered by a significant enhance in the number of houses buyers.

Having said this, the sector’s background has improved, with interest rate reductions from last year.

The involvement of the fresh work in the construction of fresh houses 1.5 million during the five -year term was also positive. And last week (June 11) Chancellor Rachel Reeves announced another 10 billion pounds investment to build thousands of houses in England.

The results of Persimmon during March 11, 2024. New completion of the house increased by 7% year on year to 10 664. The average sales price for them increased by 5% to 268 499 GBP, with fresh housing revenues increased by 13% to 2.86 billion GBP.

These numbers transferred a 14% enhance in operating profit to 405.2 million GBP.

In general, his revenues increased by 16% to 3.2 billion GBP, while tax profit increased by 2% to 359.1 million GBP.

In the update of May 1, the company repeated its forecast 11,000-11 500 fresh houses this year.

It warned, however, that this was based on the British housing market that remained stable. I think that the main risk of its stability is another major enhance in the cost of living.

How is the price of the action compared to fair value?

My key method of calculating the fair value of any action is to conduct the analysis of discounted cash flows (DCF). This establishes where the price of the company’s shares should be, obtained from cash flow forecasts for its foundations.

DCF for Persimmon shows that his actions are underestimated at the current price of 13.86 £.

Therefore, the fair value of the shares is £ 30.13, although there is no guarantee that it will reach this price.

However, it looks well supported by the forecasts of analysts that his earnings will enhance very fit 14.2% annually by the end of 2017.

He finds further resonance in low reference measurements of the company in relation to its competitors.

More precisely, his price ratio to a profit of 16.5 is at the bottom of its peer group, which is on average 31.9. These companies make up Taylor Wimpey at 19.6, Bellway at 23.3, Vistry at 28.6 and Barratt Redrow at 56.2.

Will I buy shares?

I focus on wrestling with dividend performance above 7%. Persimmon withdrawal is 4.3%, which is higher than 3.5% FTSE 100 Average, but it’s still not for me.

To say that, for investors without such a focus, it may be worth considering.

I believe that its powerful enhance in profits should enhance the price of shares (and dividend) over time.