Stock of the Week: Barratt Developments

James Gard: Welcome to Morningstar. Another stock of the week making its debut is housebuilder Barratt Developments, which our analysts have just started covering.

Given Britain’s obsession with bricks and mortar, updates from these listed companies are pored over carefully by investors and property market watchers. Is the housing market about to crash? It’s the question that people have been asking for 20 years at least, and they’ve been wrong most times.

Now this time feels different – ​​demand is there as always, but mortgages are getting more expensive by the day, prospective home buyers are battling big bills. Add a potential recession into the mix and lenders are getting nervous about defaults and headlines about property prices. There’s a chance that a government in the future – perhaps not this one – will start to dismantle the planning laws and build some more houses for young people. Who knows?

But these sort of caveats are hard to detect in Barratt’s latest annual results, which showed higher revenue, rising home completions and a 25% increase in the dividend. The company also announced a £200 million pound share buyback.

But investors are more cautious. Shares are off 45% in the year to date and according to our analyst Grant Slade, Barratt is significantly undervalued, with a 5 star rating.

For Morningstar, I’m James Gard.


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