Financial Trading Blog
Stock of the day 18/02/2016 – Barratt Developments PLC
For a while in 2015 things were looking so good for Barratt Developments; following a fantastic full year report at the start of September, which included a 19% surge in revenue to £3.8 billion and a 45% jump in pre-tax profits to £566 million year-on-year (thanks to Barratt completing its highest number of homes since the financial crisis), the stock swelled to an effective 8 year high of £6.74 by the end of the month.
(Source: IT-Finance.com 18/02/2016)
Yet things began to turn as the company entered October; by the middle of the month Barratt had slipped to £6.11 thanks to fears over the valuation of the entire housebuilding sector. And whilst the company managed to bounce back to £6.50 as October month wrapped up, a downgraded rating from JP Morgan and a gloomy note on the entire sector from Liberum soon saw its decline resume, leading to a 6 month low of £5.49 by the middle of November. The stock did manage to pick up as the year came to an end, however, closing out 2015 at £6.29.
Of course then 2016 began, and with it came the price-eroding fluctuations that have plagued companies market-wide. Barratt Developments was in no way immune, and by the middle of February had fallen all the way to £5.44, a 9 month nadir. It now sits at a current trading price of £5.74 (IT-Finance.com, 18/02/2016).
What is interesting, however, is that in the midst of that fall Barratt Developments produced another impressive update, its mid-January statement revealing a 9.4% increase in half year completions, aided by the government’s ‘Help to Buy’ schemes, with the added sweetener of an 11% rise in average selling prices to £254,000. There was one minor niggle in the middle of the report, however; Barratt started fewer new developments last year than it did in 2014, partially due to a shortage of skilled labour. Regardless, it shows that power of 2016’s bearishness that Barratt could post such a strong statement and still find itself hitting 9 month lows.
Barratt Developments PLC has a consensus rating of ‘Hold’ with an average target price of £6.39.
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