Is online estate agent Purplebricks over-valued, asks Financial Times

The Financial Times has queried whether Purplebricks is over-valued.

In an article by Judith Evans, comparisons are made with Foxtons and Countrywide.

Evans said that the company’s business model “wasn’t enough to thrill investors until recently”.

She said: “After it floated on London’s junior market in late 2015 at 95p, Purplebricks hummed along between 100p and 175p until last December, when the share price really took off.”

The catalyst, according to Anthony Codling at Jefferies, was provided by Purplebricks’ expansion plans – first into Australia, and later this year into the US.

Purplebricks recently raised £50m through a share placing to enable it to launch in America.

According to Codling: “The timing of Purplebricks’ fundraising and launch into the US was close to perfect, coming hot on the heels of a Which? report in which Purplebricks was named the best online agent in the UK with respect to accurately valuing houses.”

Codling also said that with a large chunk of Purplebricks’ shares held by its directors and by equity investor Neil Woodford – who owns 26% of the company – there are relatively sparse trading volumes, which tend to exaggerate price moves.

The FT article says it remains “an open question” as to whether Purplebricks really will revolutionise the market.

It notes that at £763m, Purplebricks’ current market capitalisation is almost double that of Countrywide at £388m.

Evans quotes Russ Mould, investment director at AJ Bell, who says that to justify its recent share price highs, Purplebricks would need 30,000 new instructions a year.

Evans’ article appeared under the headline “Is online estate agent Purplebricks overvalued?”.

It drew the comment from reader Peter Bill – a well known property commentator – “Answer to question in headline: by miles”.

Yesterday, Purplebricks’ share price slipped 1%, or 3p, to finish at 286p.

Earlier this month, on March 7, it hit a record high of 365p.

source http://blog.evolutionproperties.co.uk/2017/03/26/is-online-estate-agent-purplebricks-over-valued-asks-financial-times/