This stock’s the opposite of red-hot at the moment. But I reckon it could still be one to buy

Some of the best stocks to buy can often be found languishing at the bottom of the share price performance tables. Here, it’s sometimes possible to find well-known companies with strong balance sheets that have temporarily fallen out of favour with investors.

This is one example.

Uncertain times

I’m not sure what the opposite of red-hot is (ice-cold, maybe?) but whatever the most appropriate description is, it definitely applies to Persimmon (LSE:PSN) shares at the moment. The housebuilder’s stock market valuation has been badly affected by recent events in the Middle East.

With the price of oil soaring, there are fears that inflation could return. Rising prices could result in higher interest rates. Increased borrowing costs make mortgages more expensive. In turn, a reduced supply of loans is likely to result in fewer house sales. It’s a vicious circle.

However, on Wednesday (10 March), there was a brief respite when President Trump hinted that the war may soon be over. By coincidence, it was the day on which Persimmon published its 2025 final results.

Reflecting on events, the group said, ”the impact of the Iran conflict on customer sentiment remains to be seen”. More positively, it added: “Assuming the conflict with Iran and its impact is short, Persimmon is set to grow again in 2026.”

The group described current market conditions as “supportive”, helped by greater mortgage availability and real wages growth. Both sales reservations and its average selling price are up, suggesting that confidence is slowly returning to the new-build market.

Looking ahead

For 2026, it’s expecting to deliver 12,000-12,500 completions with underlying operating profit “towards the upper end” of the current (13 March) consensus of analysts of £486m-£517m. For comparison, the group sold 11,905 properties in 2025, and reported earnings of £472.1m. However, these forecasts were accompanied by the proviso: “assuming the conflict and its impact is short.”

As widely predicted, the group confirmed its full-year dividend would be unchanged at 60p. This means those buying Persimmon’s shares today could enjoy a yield of 5.1%.

Despite the group’s positive outlook, the housing market recovery could stall for any one of the reasons noted earlier. And a further round of supply-chain inflation could further hurt the group’s margin. In 2025, the group reported an underlying operating profit per completion of £37,430. In 2022, it was £67,696. UK construction cost inflation continues to be higher than for the economy as a whole.

Still optimistic

But despite these possible threats to a continued recovery, I think Persimmon’s shares offer good value at the moment. They trade on a historically attractive 11.6 times earnings. And its above-average yield could appeal to income investors. Of course, there are no guarantees when it comes to payouts.

Impressively, despite all of the problems that the sector’s faced since the pandemic, the group doesn’t have any debt on its balance sheet. But it does have lots of land on which to build. At the present rate of completions, it has enough to last nearly seven years.

When combined with the chronic under-supply of housing in the country, newly introduced planning reforms, and a widely held expectation of further interest rate cuts, I think Persimmon’s a stock that long-term investors could consider, assuming – you guessed it — the conflict in Iran is resolved quickly.

The post This stock’s the opposite of red-hot at the moment. But I reckon it could still be one to buy appeared first on The Motley Fool UK.

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James Beard has positions in Persimmon Plc. The Motley Fool UK has recommended London Stock Exchange Group Plc and Persimmon Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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