Crest Nicholson Holdings PLC (LON:CRST) has seen a fifth of its value wiped away over the past month following a couple of bearish trading updates.
Back in May, the housebuilder revealed that margins were being squeezed by higher costs, adding that it was difficult to pass those on through higher prices given the stagnant housing market.
READ: Crest shares tumble as H1 profits dip
Analysts had always thought the company couldn’t keep growing at such a pace to offset rising costs, but they didn’t expect it to become an issue until next year at the earliest.
As City broker Shore Capital said at the time, the warning was a “shock”.
Liberum analyst Charlie Campbell has kicked off his coverage of the stock with a ‘buy’ recommendation though, claiming that the recent sell-off has been “overdone”.
“We expect profit growth to resume as margins stabilise and geographic expansion drives output growth,” he wrote in his initiation note.
“The main long-term attraction is that the housing shortage is most acute in Crest’s regions [southern England and Midlands].”
Campbell, who has a price target of 528p, adds that Crest shares “look very over-sold” compared to its peers, which trade at a premium.
Crest shares rose 2.3% to 408.2p.