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On Thursday, Barratt Developments (LON:BTRW) Plc. (BDEV:LN) (OTC: BTDPY), currently trading at $10.78 and near its 52-week low, saw its stock rating upgraded from Hold to Buy by Deutsche Bank (ETR:DBKGn), accompanied by a maintained price target of GBP 5.36. Deutsche Bank analysts cited a solid current trading performance and an anticipated adjusted profit before tax (PBT) for the fiscal year 2025 that is expected to hit the upper end of the consensus range. This optimistic outlook prompted the firm to increase its fiscal year 2025 PBT forecast by 5%, while projections for subsequent years remain largely unchanged.
The positive interim results released by Barratt Developments have set a strong tone for the company’s future, with projections indicating a robust rebuild of profits in the coming years. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 4.53 and expects revenue growth of 34% this fiscal year. This outlook is expected to be supported by an increasing outlet profile and the anticipated synergies from the company’s acquisition of Redrow (LON:RDW). Despite this, medium-term return targets indicate a return on equity (ROE) that is projected to be significantly lower than pre-pandemic levels, aligning with broader industry trends.
Deutsche Bank’s analysis suggests that Barratt Developments is currently trading at a value that is broadly in line with its current net tangible assets (NTA), which implies that the market has not yet priced in a potential recovery. The stock currently trades at a P/E ratio of 39.55x, though InvestingPro analysis indicates the company may be slightly overvalued at current levels. The unchanged price target of 536p, which is equivalent to 1.16 times the projected fiscal year 2027 price to NTA ratio, indicates a potential 24% upside for the stock. Following a 23% decline in Barratt’s share price since August 24, Deutsche Bank has shifted its stance from Hold to Buy.
The upgrade by Deutsche Bank signals confidence in Barratt Developments’ financial prospects and its ability to navigate the current market conditions. The company’s strategic moves, such as the Redrow acquisition and its solid trading performance, appear to be key factors influencing the positive assessment from analysts. With a market capitalization of $7.63 billion and expected net income growth this year, investors will likely watch closely to see if the company’s performance aligns with Deutsche Bank’s projections in the coming fiscal periods. For deeper insights into Barratt’s financial health and growth prospects, including 8 additional exclusive ProTips, visit InvestingPro.
In other recent news, Barratt Redrow has received an upgrade from RBC Capital, which lifted the company’s stock rating from Sector Perform to Outperform. This change comes with a new price target of GBP5.75, reflecting optimism about the company’s future prospects. Barratt Redrow has been focusing on integrating its acquisition of Redrow and managing related regulatory challenges. RBC Capital anticipates that these issues will be resolved by 2025, allowing the company to return to normal business operations. The firm has addressed significant landbank issues in 2024 and is now positioned for delivery and volume growth. While the integration process may present operational challenges, RBC Capital forecasts more market tailwinds than headwinds for Barratt Redrow in the coming year. This favorable environment is expected to help the company navigate potential difficulties and emerge stronger. The analyst commentary highlights the expectation of a positive outlook despite possible integration hurdles.
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