Vistry ($VTY.L): This Thing Is a Mess - That's Why We're Buying

The Market’s Got This One All Wrong

Markets hate uncertainty. That’s exactly why Vistry ($VTY.L) is so cheap right now. Investors can’t decide if this is a distressed homebuilder or a high-turn partnerships machine.

It also probably doesn’t help that within just three months, Vistry managed to issue three separate profit warnings—an absolutely brutal and embarrassing look. But more important to us, all $100 million+ in cost overruns came from the legacy homebuilding business—a business that, on a go-forward basis, has nothing to do with what we’re buying today.

Before we dive deeper, let’s clarify the presale model that makes this work. Unlike traditional homebuilders, Vistry pre-sells the majority of its homes before construction begins. This means it operates on a faster cash cycle, turns assets more efficiently, and secures better terms with landowners and contractors. This is the core of why the partnerships model works.

But here’s what everyone misses…

The market is too focused on what’s unknown about Vistry’s upside and completely ignoring what’s already certain about its downside protection.

Yes, the business model transition is messy.

But if you focus on what’s KNOWN—this stock is an obvious buy.

Instead of getting caught up in uncertainty, let's start with what we DO know:

📌 Market Cap: $2.48 billion

📌 Net Debt: $225 million

📌 Enterprise Value: $2.7 billion

📌 Tangible Book Value: $2.63 billion

📌 FY24 Adjusted Earnings (Including One-Time Cost Issues): $310 million

📌 FY24 Normalized Earnings (Excluding One-Time Cost Issues): $410 million

That means today’s valuation is:

📌 EV / EBIT (including one-time costs): 8.7x

📌 EV / EBIT (excluding one-time costs): 6.5x

📌 Price to Tangible Book: 1.03x

So, we’re either paying 8.7x seriously handicapped earnings, 6.5x normalized EBIT, or almost exactly 1x tangible book value. Either way, for these business models (either traditional or partnerships—take your pick), this is a good relative value buy at these levels.

Book value is $2.63 billion, and the stock trades at a $2.6 billion market cap.

Even if partnerships don’t fully work, we’re paying a bargain price for a regular old homebuilder.

✅ Vistry is still profitable, even with massive cost overruns and execution issues.

✅ Comparable partnerships businesses have sold for 12-13x EBIT, while we’re paying just 6.5x today.

✅ The market is paralyzed by uncertainty—our edge here is hyper-focusing on the certainty of downside protection.

Why the Business Model Works Better Than Traditional Homebuilding

1. Higher Asset Turns = Higher ROCE Potential

Traditional homebuilders sit on land for years before turning it into cash. Vistry moves faster, because it doesn’t start building until it presells the vast majority of orders. This efficiency allows for a 2.5x faster asset turnover than traditional homebuilders.

2. Flexibility in Market Cycles

Unlike traditional homebuilders who are stuck with whatever demand the market gives them, Vistry has the flexibility to shift between open market and partnership-funded sales.

Example: In H1 2024, they saw a strong PRS (Private Rented Sector) market, so they increased the partner-funded share of completions from 67% to 74% year over year.

3. Suppliers and Landowners WANT to Work with Vistry

Because Vistry pre-sells homes, it can buy land in much bigger chunks and offers certainty of completion to subcontractors, resulting in better relationships with landowners and contractors and better terms across the supply chain.

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Vistry's Cognitive Tension: The Market Thinks It’s One Thing, But It’s Actually Another

The mispricing here is extreme, and it comes down to a fundamental misunderstanding of what Vistry is today.

What the Market Sees: A struggling, asset-heavy homebuilder that may or may not succeed in its partnerships transition.

What’s Actually True: Vistry is already running a high-ROCE, capital-light partnerships model with substantial downside protection and asymmetric upside.

The moment this disconnect clears up, the stock re-rates sharply higher. But here’s the thing—even if that doesn’t happen right away, the risk of permanent capital impairment is incredibly low.

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Quick Win Takeaway

This setup works because it doesn’t require the bull case to be perfect.

✅ If you believe in any part of the upside, the valuation is wildly mispriced.

✅ And if you don’t? You’re still getting a legacy homebuilder at a good price.

✅ This is the kind of investment where even a partial win means serious upside.

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Valuation: Quantifying the Opportunity

To put real numbers to this opportunity, let’s compare Vistry’s valuation using two key metrics: EBIT multiples and book value.

1. EBIT-Based Valuation

Comparable UK partnerships businesses have historically transacted between 10-12x EBIT. Splitting the difference, we’ll use 11x as a reasonable multiple.

• Based on FY24 Adjusted Earnings (Including One-Time Cost Issues):

  • EBIT: $310 million

  • Valuation: $310M × 11 = $3.41 billion

  • Upside Potential: 26% above today's $2.7B Enterprise Value

• Based on FY24 Normalized Earnings (Excluding One-Time Cost Issues):

  • EBIT: $410 million

  • Valuation: $410M × 11 = $4.51 billion

  • Upside Potential: 67% above today's EV

• Based on Management’s Mid-Term Guidance ($1B EBIT Target):

  • EBIT: $1 billion

  • Valuation: $1B × 11 = $11 billion

  • Upside Potential: 307% above today's EV!

This shows that even in the most pessimistic earnings scenario, Vistry is undervalued compared to precedent transactions.

2. Book Value-Based Valuation

UK homebuilders typically trade near or above book value.

• If Vistry were valued like a legacy homebuilder at book value (~1x P/B), its valuation would be almost exactly where it is today.

• This confirms that we’re getting all upside optionality on the partnerships business essentially for free.

The Key Takeaway

Vistry is either a cheap traditional homebuilder, or an incredibly mispriced partnerships business.

• At worst, it's valued fairly on a legacy book value basis.

• At best, it's worth 2-3x more as the transition plays out.

Final Thought: What Are You Actually Betting Against?

To be bearish here, you have to believe:

❌ That Vistry’s partnerships business is worthless.

❌ That comparable businesses selling for 12-13x EBIT don’t matter.

❌ That a stock trading at tangible book value with a solid balance sheet is somehow a value trap.

None of that adds up. That’s why this opportunity exists. And that’s why we’re buying.

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What About the Balance Sheet?

One of the biggest areas of confusion around Vistry is how to interpret its balance sheet—specifically, whether land creditors should be treated as debt. Given that land creditors represent a $750 million line item, this is an important question.

💡 My conclusion? No.

Think of land creditors like operating leases. Just like lease payments come out of EBIT (so we don’t double count them as debt), land creditors also get expensed through EBIT. Treating them as additional debt would be double counting. In addition, unlike debt repayments, Vistry actually gets land in return for these payments.

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Comparable Transactions Prove We’re Undervalued

We have multiple examples of partnerships businesses transacting for 12-13x EBIT (Galliford Try Partnerships, Keepmoat):

Even using the pessimistically high 8.7x multiple we’re paying today, Vistry should be worth significantly more.

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So What’s the Bear Case?

There’s been a lot of debate about Vistry, even among top investors. The Value Investors Club (VIC)—home to some of the best minds in the industry—famously has 400+ messages on this stock, expressing just how truly complicated the core question truly is : Is the bull case actually real?

Normally, I’d put something like this in the "too hard" pile and move on. But here’s why this one is different:

✅ Downside is very clearly protected.

✅ Upside is a free option that could work out incredibly well.

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Final Thoughts: You Don’t Need This to Be the Next NVR

This isn’t the next NVR. But it doesn’t have to be.

At worst, you’re getting a cheap, hated homebuilder with significant downside protection.

At best, you’re getting a high-return, capital-light partnerships model at half of the multiple its peers have transacted for.

That’s a pretty damn good risk/reward.