J.P. Morgan has named this UK housebuilder as its “top pick” in the sector, arguing it screens as one of the cheapest when evaluated on enterprise value to earnings before interest and tax (EV/EBIT) metrics, in a note dated Thursday.

The brokerage’s analysis challenges common investor concerns about Persimmon’s valuation, which trades at approximately a 40% premium to the sector on price-to-tangible net asset value (P/TNAV) and a 10% premium on price-to-earnings (P/E) ratios.

J.P. Morgan argues these traditional metrics fail to capture the company’s relative value, particularly as earnings per share across the sector remain roughly 60% below peak levels and are distorted by building safety provisions and land creditors.

According to J.P. Morgan estimates Persimmon trades at approximately 10x EV/EBIT compared to a sector average of 12x and an average of 11x among the five largest UK housebuilders in the firm’s coverage. 

This discount exists despite Persimmon demonstrating superior financial metrics across several key measures, the brokerage said.

The company’s building safety provision to market capitalization ratio stands at just 5%, well below the Big-5 average of 12%, according to J.P. Morgan’s analysis of company reports. 

Persimmon’s EBIT margins register at approximately 14%, exceeding the Big-5 average of 13%. Additionally, J.P. Morgan forecasts a two-year earnings compound annual growth rate of 10% for Persimmon, compared to 6% for the Big-5 average.

The brokerage calculates that if Persimmon traded in line with the Big-5 average EV/EBIT multiple, this would imply a 7% increase in its market capitalization, all else equal. 

Were the stock to trade at a comparable level to Bellway at approximately 12.4x current EBIT, J.P. Morgan suggests this would imply a potential 30% increase in value.

J.P. Morgan’s enterprise value calculation for Persimmon incorporates a market capitalization of £4.39 billion, building safety provisions of £208 million as reported in the company’s first-half 2025 results, net cash of £401 million based on J.P. Morgan estimates, and land creditors of £116 million from the last reported figures. This yields a total enterprise value of approximately £4.88 billion.

The brokerage notes that given Persimmon’s low fire safety provision and expectations that spending on this issue should conclude within the next couple of years, J.P. Morgan sees scope for favorable capital allocation policies in the near future.

By comparison, Bellway trades at 12.4x EV/EBIT, representing an 18% premium to the Big-5 average. The company’s building safety provision stands at £516.4 million as of its fiscal year 2025 results, translating to 16% of market capitalization. Bellway’s EBIT margins reach 16%, with forecast earnings growth of 11% over two years.

Taylor Wimpey trades at approximately 10x EV/EBIT, a 6% discount to the Big-5 average, with building safety, leasehold and other provisions totaling £549.1 million, or 14% of market cap, as reported in half-year 2025 results. The company’s EBIT margins stand at 11%, with J.P. Morgan forecasting 4% earnings growth.

Barratt Redrow trades at 10.4x EV/EBIT, broadly in line with the Big-5 average, according to J.P. Morgan.

The company carries building safety and reinforced concrete frame buildings provisions of £1.07 billion as of fiscal year 2025 results, representing 20% of market capitalization. Its EBIT margins register at 11%, with forecast earnings growth of 11%.

Berkeley trades at approximately 10x EV/EBIT, a 6% discount to the Big-5 average. The company’s building safety and other provisions total £235.2 million as of half-year 2026 results, equating to 6% of market cap.

Berkeley boasts the highest EBIT margins among the group at 19%, though J.P. Morgan forecasts a negative 5% earnings growth rate.

At the opposite end of the valuation spectrum, Crest Nicholson trades at 20.8x EV/EBIT, a 76% premium to the coverage average, with building safety provisions of £256.5 million representing 73% of market capitalization. The company’s EBIT margins stand at just 6%, significantly below the sector average of 11%.