It’s been a difficult year for FTSE 100 housebuilding share Barratt Redrow (LSE:BTRW). At 255.6p, it’s now the index’s worst performer over 12 months, slumping 39% in value.
Rising concerns over interest rates and buyer affordability have walloped the UK’s biggest housebuilder. Its valuation has toppled, and today it can be picked up on a price-to-earnings (P/E) ratio of 10.2 times for this financial year (ending June 2026). That’s below the Footsie average of 12-13.
For fiscal 2027, the P/E falls to 8.1, too. At these levels, I’m wondering if Barratt shares are worth attention from bargain-chasers. Here’s what I’ve found…
A bargain share?
Whatever way you look at it, Barratt Redrow shares look dirt cheap. It’s not just that P/E ratio that makes the builder look like a bargain based on expected profits. The price-to-earnings growth (PEG) ratio sits at 0.1 and 0.3 for this year and next respectively.
The FTSE company also offers tremendous value based on expected dividends. The dividend yield for this financial year is 5.9%, and for fiscal 2027 it grows to 6.8%. For context, the latter figure is more than double the forward average of 3.2%.
Finally, the price-to-book (P/B) ratio is 0.5, showing Barratt trading at a discount to the net value of its assets. Like the PEG, any reading below 1 indicates a share trading below value, at least on paper.
What’s the catch?
Having said that, some companies trade on low earnings multiples and P/B ratios for a reason. In other words, they have poor growth potential and/or pose significant risks to investors.
I’m not going to dress things up: Barratt Redrow’s job of growing earnings is becoming much more difficult. Like other UK shares, it’s under threat as the Middle East war drags on, pushing up inflation and potentially interest rates. This could be catastropic for home sales by stretching buyer affordability to breaking point.
Last week, market rival Bellway cut profit forecasts and warned that the conflict “heightens the risk of both inflationary cost pressures and an impact to customer demand, and we have already seen volatility return to the mortgage market“.
With the risks of a prolonged war growing, Barratt’s share price could be in for a bumpy time.
Are Barratt shares a buy?
That said, I don’t think this makes Barratt Redrow a share to avoid. I look for stocks to buy that I’d feel comfortable holding for a decade or more. Over this sort of timescale, I think the housebuilder has exceptional chances to grow profits.
There already aren’t enough houses to go around following decades of underinvestment. And official data suggests the UK population will keep soaring, reaching 73.7m by 2036 from roughly 70m today. In this climate, I’m expecting sales and margins to swell for Barratt as asking prices rocket.
Indeed, as the UK’s biggest builder by volume, the business is especially well placed to capture this long-term opportunity. Government reforms to improve the planning process will make this easier too. While not without risk, I think Barratt’s a top FTSE 100 stock to consider buying after its recent dip.
