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By Connor Campbell, Financial Analyst, Spreadex
Stock of the day: Barratt Developments (LON:BDEV)
For the first 5 months of the year Barratt looked unstoppable. After a rollercoaster rise and fall in January the stock proceeded with minimal fuss, eventually hitting a 17 month high of £6.24 in early May. Since then, however, things have been a bit choppier; Barratt has repeatedly failed to break through £6.25 and at one point fell to £5.59 in the aftermath of the UK general election. Barratt Developments PLC now sits at a current trading price of £6.15.
As befitting the stock’s performance, Barratt’s 2017 updates have been largely positive. Though it revealed in January that in the second half of 2016 it had built far fewer homes in London due to slowdown in the capital, February’s interim results saw the company post a 9% surge in pre-tax profit (to £321 million) while hiking its half year dividend 22% to 7.3p per share.
Cut to May, and Barratt continued to impress. For the financial year to June the company stated that it would complete 17350 home, the highest level since 2008. It went on to say that conditions in the sector remained ‘good’ despite signs of softness, with 'Help to Buy' a huge boost to its performance (which is why reports in August that the government may end the scheme earlier than expected saw Barratt fall 4%).
Most recently the house builder announced in July that for 12 months to the end of June its average selling price rose 5.9% to £275,000, leading to forecasts of a 12% increase in annual pre-tax profit to £765 million. It also said that for forthcoming financial year it expects ‘modest growth’ in home sales due to its concerns about getting ‘enough skilled workers’, pointing out that it is ‘an industry trend’.
In terms of next week’s annual update, investors may want further details about those 2018 expectations alongside confirmation of (or, indeed, an improvement on) that aforementioned jump in pre-tax profit. If Barratt is to finally break through £6.25 once again then it may also need to produce a healthy dividend.
Barratt Developments PLC has a consensus rating of ‘Hold’ with an average target price of £6.46.
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