Are 76% off Vistry shares a once-in-a-decade opportunity?

Is it a once-in-a-decade opportunity to buy Vistry (LSE: VTY) shares? It’s been 10 years since the share price was so cheap. Longer than that, in fact, as it has now fallen to a 14-year low. The price-to-earnings ratio is around eight – one of the lowest on the FTSE 250. The freefall has been very recent too. The shares lost 25% in value in a single day this month. Budding investors can now pick up shares at 76% off what they would have paid in 2022.

While such a large fall could be a warning sign, the obvious question here is whether this is a golden opportunity to buy in at a low point? Are Vistry shares a dirt-cheap bargain?

Changes

An important first consideration is the rest of the housing sector. If we compare to the high that Vistry fell 76% from, we see that other stocks have suffered too. Other UK housebuilders like Persimmon (down 35%), Taylor Wimpey (down 45%), and Barratt Redrow (down 53%) have not escaped the carnage.

The major problem is that margins are getting squeezed all over. Supply cost inflation has been rising, wages have been bumped up, and mortgages are more expensive with interest rates set to rise. We would likely need to see some change for this notoriously cyclical sector to turn around here.

Vistry being the worst of the lot is likely down to the nature of its operations. As well as building and selling houses to the public, its completions are often arranged with partnerships – local authorities or housing associations and such. This can mean stability when times are good, but recently it has led to lower margins and alarming profit warnings.

To cap things off, long-time CEO Greg Fitzgerald announcing his departure has not helped matters either.

Key point

So what are the reasons for optimism here? The stand-out statistic is surely the valuation, a price-to-earnings ratio of just eight is one of the lowest across the entire London Stock Exchange. That means we’re getting a lot of earnings for the cost of every share – a sign the share price might be at a low point.

As mentioned, housing tends to be cyclical in nature. The boom years of the early 2010s saw many housebuilders go on a complete tear. The share price of Vistry – known as Bovis Homes then – tripled in less than five years without even taking into account dividends. The key point, perhaps, is that investors would have had to buy in after the 2008 crash.

Buying a strong share at a low point will always prove to be a winning strategy in the stock market. It’s not obvious that Vistry will be one of those rare once-in-a-decade buying opportunities today, but it very well could be. I think investors could give it consideration.