Galliford Try share price: what to expect from first-half results

When are Galliford Try’s results released?

Galliford Try publishes its first-half earnings on 13 February, having released full-year numbers in September 2018.

Galliford Try results preview: what does the City expect?

No expectations are currently provided for Galliford, but other housebuilders have seen improvement in the past quarter, and selling prices continue to rise, which will aid revenue growth. But cost inflation will erode margins, hitting earnings growth.

Sentiment towards Galliford, a mixture of construction firm and home builder, has soured, partially thanks to the 50% drop in its shares since the peak in mid-2015, when the firm’s stock traded hands for £15 each.

In the wake of the collapse of Carillion, Galliford was forced to raise funds from investors, as it looked to recoup the cost of its failed joint venture with the firm. But it has weathered the storm and the overall sector seems to be in better shape. At just 5.4 times forward earnings, the shares are back to the low valuations of early 2018, well below the five-year average of 9.1, and a world away from the 14 times earnings seen in 2015.

The stock is also cheap compared to the rest of the sector, which trades at 13.1 times forward earnings. Galliford’s current valuation is dangerously close to the 5 level that would denote that the shares are ‘cheap for a reason’, which means investors need to be somewhat cautious.

There are reasons to be positive, since the firm has won two big road-building projects from Highways England, while Linden Homes, the housebuilding division, is reported to be trading in line with forecasts. The first-half results should give investors the chance to see whether the renewed optimism is justified.

How to trade Galliford Try’s first-half results

As a relatively small stock, at a market capitalisation of around £800 million, Galliford’s share price is quite volatile, with an average move on results day of 6.4%. Traders looking to exploit any opportunities on results day should be aware of the possible volatility seen in the firm’s shares.

How has the Galliford Try share price been performing?

Galliford’s peak in 2015, at over £15.00 per share, seems a long time ago. Since then, the shares have been very volatile, swinging to a low of £6.00 in 2016 during the Brexit referendum, before surging to over £13.00 in early 2017. But then a new decline began, and since then the stock has seen a sequence of lower highs, at £12.50, £12.17 and then £10.60.

While the price has recovered from the lows of December as part of the broader market rebound, the overall downtrend is still, for now, firmly in place.

Galliford Try share price: technical analysis

The overall direction of travel in Galliford’s shares remains downward. Crucially, the stock has broken below the £7.40 lows of early 2018, falling below this level in November 2018. A bounce back since then saw the price hold briefly above this level, but since then the shares have been unable to hold on to this level.

Galliford Try weekly chart

Worryingly, the shares look to be taking a distinctive turn lower, eroding the series of higher lows seen over the past few days. Further declines below £6.95 would suggest that a new drop is at hand, targeting the lows of December at £5.63.

Galliford Try daily chart

A bullish view would be in place if the price posts a daily close above £7.50, the limit of gains in January. This would then open the way to the highs of November, when the price reached £8.80. Only a close above this level creates a higher high on the daily chart, beginning to restore a measure of bullishness to the share price.

Galliford Try hourly chart

On the hourly chart, the price has bounced between £6.96 and £7.50, forming a trading range since the rally from the December lows topped out. A return to £6.96 could provide a possible buying opportunity, while any rally towards £7.50 might suggest a new short trade is possible.

Conclusion

Galliford certainly has the capability to be an interesting long-term investment. The monthly chart would suggest a very long-term uptrend, from the lows of 2009 when the shares traded down at 34p per share. The fundamental picture has been less encouraging of late, and until Brexit is removed as a worry then concerns linger about the health of UK construction and the national housing market.

On the daily chart, it is hard to be too bullish, but the shares have seen good two-way traffic. Sharp rallies have, in the long-term, merely provided selling opportunities. Dividends have been steady, if not excessively generous, and earnings per share growth has been 13% over the past five years.