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Barratt Redrow (LSE:BTRW) shares have spiked today (12 February) after the builder raised its full-year profit forecasts.
At 461.8p per share, Barratt’s share price was almost 5% higher just after midday and the FTSE 100‘s biggest riser, having risen even further earlier.
So what’s been happening at the UK’s biggest housebuilder? And is now the time to consider investing?
Robust recovery
Improving homebuyer affordability has revilatised homes demand from the second half of last year. This is thanks to a mix of recent Bank of England (BoE) interest rate cuts and fierce competition in the mortgage market.
Encouragingly, Barratt Redrow’s trading update today shows that the upturn remains strong at the start of 2025.
Revenues rose 23.2% in the six months to December, to £2.3bn, while underlying pre-tax profit increased 6.4% to £167.1m.
Its net private weekly reservation rate improved to 0.6 from 0.45 in the same 2023 period. And reservations have remained robust since then, Barratt said, also averaging 0.6 between 30 December and 2 February.
Forward sales dropped to 10,903 homes as of 2 February from 11,460 a year earlier. But the value of these sales improved to £3.4bn from £3.1bn previously.
Now for the updates
Solid reservation activity since the New Year mean that Barratt now expects “to deliver total home completions of between 16,800 and 17,200” in the full financial year (to June 2025). Completions rose 10.9% in the first half of the year, to 6,846.
Pre-tax profit, meanwhile, is tipped to be “towards the upper end” of a market projection of £506m to £588m.
Elsewhere, the group said that it now expects cost synergies following last year’s Barratt-Redrow tie-up to be £100m, some £10m ahead of prior forecasts.
However…
Barratt’s news has been the pick of several robust housebuilder updates since the start of 2025. But while the business strikes a positive tone, the market still faces uncertainty as the UK economy stagnates and Stamp Duty changes from this April loom.
There’s also the ongoing problem of cost inflation, which pulled the firm’s adjusted gross margins down 1.1% in the first half, to 14.9%.
But on balance, things look good for Barratt as the BoE takes a more enthusiastic approach to interest rate cuts. As many as four rate reductions are currently expected by the market this year, pulling the central bank’s lending benchmark to 4% or even lower by the end of December.
Competition in the mortgage market also continues to heat up, which is good news for borrowers.
To buy or not to buy
Does all this make Barratt Redrow shares a good investment though?
The business is clearly making strong progress in an improving market. And the housebuilder’s long-term outlook remains robust, underpinned by the UK’s chronic ongoing homes shortage that’s supporting prices.
My concern, however, is that the good news is now baked into Barratt’s valuation. Following today’s gains, its price-to-earnings (P/E) ratio sits at a bulky 20.6 times.
This suggests to me that the good news may leave little room for further share price rises. A high P/E ratio like this may also prompt a sharp price reversal if trading conditions deteriorate again.
I plan to hang onto my own Barratt shares. But at current prices I’m not tempted to add more to my portfolio.
