With an 8% yield and a P/E beneath 12, Taylor Wimpey seems to be in deep worth territory

My Taylor Wimpey (LSE: TW) shares have taken a beating, plunging 22% over the previous 12 months. But after I crunch the numbers, they nonetheless appear like they’re price contemplating to me. However are they?

A phrase of warning. I first purchased shares within the FTSE 100 housebuilder in 2023. In that comparatively brief interval, they’ve been extremely unstable. At one level, I used to be sitting on a 40% paper acquire. Now I’m down 5%.

Increased rates of interest have hit purchaser confidence and made mortgages costlier, hitting demand. And that’s on high of long-term affordability points, to not point out the slowing financial system. Increased inflation’s pushed up labour and materials prices, additional squeezing margins. It’s rather a lot to tackle.

Is that this FTSE 100 inventory actually a discount?

Like lots of its rivals, Taylor Wimpey reported a drop in property completions final 12 months. The board responded by providing incentives and reductions to consumers, once more shrinking margins.

But the balance sheet stays sturdy. Taylor Wimpey boasts a strong land financial institution, low debt and a disciplined method to managing prices. 

With a price-to-earnings ratio of 11.6 instances, the inventory seems to be low cost in comparison with its historic common and friends. That’s a key cause why I see a chance right here.

The UK nonetheless faces a power housing scarcity, supporting demand. The Financial institution of England’s anticipated to chop rates of interest two or 3 times this 12 months. If it does, mortgage prices might fall and consumers return, boosting gross sales volumes and profitability.

None of that is assured. Markets anticipated six rate of interest cuts final 12 months. We received simply two. Inflation stays sticky. Donald Trump’s tax cuts and commerce tariffs might maintain it that means.

In its buying and selling replace on 16 January, Taylor Wimpey stated full-year UK completions have been in the direction of the higher finish of its steerage vary, with working revenue according to expectations. We’ll know extra when remaining outcomes printed on 27 February.

The group ended 2025 with a strong £2bn order ebook, representing 7,312 properties. Nevertheless, the board additionally cautioned that Finances hikes to employer’s Nationwide Insurance coverage and the Minimal Wage will push up prices from April.

A superb dividend yield

I haven’t talked about the dividend but. That’s an enormous promoting level. The forecast yield for 2025 is 8.5%. The board coverage is to pay 7.5% of internet belongings annually, sometimes round £250m. 

I don’t anticipate speedy development. Final February, the board lifted the dividend by a fraction of a penny, from 4.78p to 4.79p. Given the sky-high yield, it’s laborious to complain.

Taylor Wimpey stays money generative. It’s weathered earlier downturns whereas sustaining engaging shareholder returns. But when issues get actually dangerous, it may very well be reduce.

The 16 analysts providing one-year share value forecasts have produced a median goal of simply over 148p. If appropriate, that’s a rise of round 27% from at the moment. Mixed with that yield, this is able to give me a complete return of 35%. Fingers crossed!

For now, Taylor Wimpey stays a well-managed enterprise with long-term development potential. Whereas dangers stay, notably round rates of interest and shopper sentiment, its valuation seems to be compelling. I gained’t purchase although as I have already got a giant stake. However I really feel the shares are price buyers contemplating.