How much could £9,995 invested in Barratt Redrow shares potentially be worth this time next year?

Barratt Redrow (LSE: BTRW) shares are in meltdown. It’s the single biggest faller on the FTSE 100 over the last three turbulent months, crashing 38%. Some investors will find that irresistible. Are they mad?

It’s a perfectly valid strategy to target struggling shares. I do it regularly. The aim is to bag them at a reduced price, and get a higher yield too. It’s the same as going shopping in the sales. Stocks are cheap, so fill your boots. The rewards can be huge, if you get it right. I’ve just been checking out the broker forecasts for Barratt Redrow, and they’re eye-popping.

Eighteen analysts offer one-year share price forecasts, and they produce a consensus target of 415p. Today, the shares trade at 244p. If those forecasts are correct, the shares could rocket 70% in a year.

Can this stock really grow 70% in 12 months?

That’s a brilliant potential return, and there’s more. Barratt Redrow is forecast to yield almost 6% this year. So that’s a total return of 76%, which would transform a £9,995 investment (after trading charges) into a thumping £17,591. So should investors leap in with both feet?

First, a word of caution. Broker forecasts are just educated guesses. Also, some of those may have been made before the Iran war, when the outlook was brighter.

Also, just because a stock has plunged by more than a third, as Barratt Redrow has, doesn’t mean it can’t fall by another third, or more. Its shares are down 47% over 12 months, and 68% over five years. In fact, they’re trading at a 13-year low. So is Barratt Redrow a horribly run company?

Nope. It’s simply that housebuilders are being battered across the board. Rival Persimmon is the second worst performer on the FTSE 100, while Berkeley Group Holdings, Taylor Wimpey, Vistry Group and others are all tumbling.

They’ve been hit by the cost-of-living crisis, rising interest rates, the end of Help to Buy, the post-Grenfell fire-safety cladding scandal, and the rising cost of materials and employer taxes.

2026 was the year they were expected to come good, as inflation eased, mortgage rates fell and the economy picked up. That changed when the US bombed Iran.

So is this a brilliant bargain?

A good company hit by bad news elsewhere – isn’t that a trigger signal to buy? To a degree, yes. But the problem is, when a company is at the mercy of wider events, turning things around isn’t easy. Basically, Barratt Redrow needs lower inflation and interest rates, and a thriving UK economy, where buyers have money in their pockets. Instead, we have a rocketing oil price.

It’s cheap, with a forward price-to-earnings ratio of just 9.7. There’s a brilliant yield, but dividends have been choppy lately, as my table shows. The interim 2025 dividend was cut too, from 5.50p to 5p, a drop of 10%. I’m sure the final one will be trimmed too.

In my view Barratt Redrow is a thrillingly high-risk/high-reward stock, and well worth considering on those terms. But investors have to be brave, and patient.