What’s Going on with the CSR Share Price?

What happened to the CSR share price?

With a swag of headlines about a potential bubble, it might be easy to think property has hit the skids. Yet one company that supplies the building industry — CSR Limited [ASX:CSR] — is enjoying one of its most profitable ever trading periods.

After hitting a low of $2.41 in late January, the CSR share price has made a dramatic comeback, recently trading over $3.40. That’s a nice 40%-plus gain in less than three months.

Why did CSR shares do this?

Announcing a 32% jump in half-year profits, and a corresponding 35% increase in dividends in November last year, CSR would have expected a nice little boost to its share price.

Instead, the market thought that the best was over for CSR and sold it down on expectations the building construction has already peaked. It also got pulled down by the big sell-off that hit the market at the start of this year.

However, as building approvals continue to track along nicely, the market realised that it’s been too harsh on the CSR share price and been buying back in.

Even CSR is getting in on the act, announcing in March a share buy-back to help use up its existing cash. It expects to buy $150 million of its own stock on-market over the next couple of years.

What now for CSR?

The next driver for CSR will be any uptick in building approvals, and any potential move in interest rates. With record low rates looking likely to remain in place for some time, this should hopefully keep construction ticking along.

However, building is a cyclical activity, so be aware. After such a big bounce in the share price, investors need to ask if the price has run too far before deciding to invest.

Matt Hibbard,
Money Morning

Money Morning Australia