Ibstock Share Price Forecast August 2021 – Time to Buy IBST?

Ibstock (LSE: IBST) shares are in the green today, currently trading at 223.2p after moving 2.39% over the past three months. In such volatile conditions, Ibstock has shown some traits that are associated with investment returns, which are a relatively cheap valuation and high quality. All of this has led to some investors wondering whether this is the right time to pick up IBST shares.

Ibstock – Technical Analysis

Ibstock’s financial statement reveals a market cap of £914.185 million and total assets worth £697.319 million. Revenue for 2020 was at £316.17 million with a profit margin of -8.86%, compared to the revenue of £409.26 million in 2019.

Oscillators for Ibstock such as Stochastic RSI Fast (3, 3, 14, 14)(100.0), Williams Percent Range (14)(−24.0), Bull Bear Power(12.8) and Ultimate Oscillator (7, 14, 28)(56.9) are pointing towards neutral. However, moving averages such as Exponential Moving Average (100)(217.0), Simple Moving Average (100)(220.4), Exponential Moving Average (200)(212.6) and Simple Moving Average (200)(211.9) are pointing towards a strong buy action.

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Recent Developments

As the construction sector is experiencing significant supply issues due to increasing demand, the company has been facing considerable cost increases. This is why Ibstock has increased brick prices by more than 10% in an effort to tackle the exceptional price increases on haulage and with materials and haulage in short supply, leaving the company no choice. UK contractors are already expecting similar price rises from other major brick and block manufacturers.

Ibstock’s revenue for the first-half revenue was £202 million for 2021, which is an increase of 54% from 2020 and 94% from pre-pandemic levels. Underlying cash profits also grew more than 5-fold from 2020, coming in at £55 million. However, this is 7% below 2019’s level.  While concrete sales for the company returned to pre-pandemic levels, it is still 8% below its performance in 2019. Supply chain disruptions have become more evident in the current trading period, despite demand being robust. The company has announced that it will pay an interim dividend of 2.5 per share.

Ibstock was forced to embark on several cost-cutting measures to tackle the decline in demand. This has affected almost 4 of its factories with associated job cuts. However, this has turned it into an efficient organisation with a lower cost base. The management has decided to modernise two of its factories that will increase capacity. The company is also helped by low interest rates and government support which has boosted consumer affordability.

Ibstock Management has spent the majority of last year shoring up its balance sheet as they saw risks with an impending economic storm.  However, the plans to invest £60 million in increase capacity can go to waste if there is a decrease in demand. However, the company’s current valuation reflects the market’s confidence in an impending recovery. Risks of an economic downturn are small, even though high expectations could create some turbulence for the shares moving forward.

Should You Buy IBST Shares?

IBST’s positive momentum trends reflect in its earnings growth and share prices. IBST is trading close to its 52 week high prices, which may result in it beating broker estimates and achieving forecast upgrades. IBST has seen a share price return of 14.4% relative to the market over the last 12 months. While market volatility and economic uncertainty can adversely affect momentum, previously strong stocks normally recover quickly once confidence returns. All of this points towards IBSt being a stock you can add to your portfolio for the time being.

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