The FTSE 100 might be rallying, but one share not joining in on the fun is Berkeley Group (LSE:BKG). The housebuilder’s dropped 13% today (1 April) after a shocking trading statement sent investors scurrying for the exits.
Wednesday’s drop means Berkeley’s share price has slumped 31% over the last month. At £29.68 per share, they trade on a price-to-earnings (P/E) ratio of 9.1 times for this financial year (to April 2026). For financial 2027, this falls to 8.8.
The question is, are Berkeley shares now too cheap to resist?
So what’s happened?
In an unscheduled market update, the builder said it still expects to deliver pre-tax profit of £450m for the current financial year. It also confirmed its £300m net cash target remains unchanged.
But that’s where the good news stopped. Warning of worsening conditions after a modest recovery in January and February, Berkeley said:
[As indicated in March], recent geopolitical events and the macroeconomic consequences, including reduced potential for further rate cuts, could reduce confidence in a near-term market recovery. This has now become a reality.
As a consequence, Berkeley said it’s now expecting to deliver £1.4bn of pre-tax profit between fiscal 2027 and 2030. That’s roughly 30% to 35% lower than City analysts had been forecasting.
Pulling up the drawbridge
But Berkeley wasn’t done yet. Amid “unprecedented” rises in costs and regulations, alongside increasing interest rates and weak buyer demand, the builder said it would stop purchasing new land until conditions improved.
The firm said it doesn’t believe it can make its “required rate of return on investment in new land acquisitions… due to the continuous increase in the tax and regulatory burden on residential development“.
Battening down the hatches isn’t a bad idea in the current environment. But it doesn’t exactly smack of confidence, and raises questions about when exactly the firm will return to growth. No wonder, then, that Berkeley shares are now trading at their cheapest for a decade.
Is this FTSE stock a buy?
I like to buy quality FTSE 100 shares when they slump in value. So I’m asking myself, should I buy Berkeley after today’s share price collapse?
I’ve long been bullish on the builder, which focuses on building new homes in London and the Home Counties. As the UK population rapidly grows, these companies have enormous earnings potential over the medium to long term. But today’s update changes things for me.
Berkeley isn’t the only national housebuilder sounding the alarm. As interest rates rise, sector profits are in enormous jeopardy. Yet the scale of the company’s profit downgrade — combined with its drastic plan to stop new land buys — suggest to me that it’s far less operationally robust than its peers.
It may be a FTSE share for risk-tolerant dip buyers for consider. But I won’t be buying Berkeley shares for my portfolio.
