Deutsche Bank has adjusted its price target on shares of Barratt Developments Plc. (LON:BDEV: LN) (OTC: BTDPY), a UK-based housebuilding company, to GBP5.36, up from the previous GBP5.00, while maintaining a Hold rating on the stock.
The revision follows the company's recent financial results, which met analyst expectations.
The Deutsche Bank analyst cited a forecasted reduction in gross margins as the reason for lowering the standalone earnings per share (EPS) predictions for the fiscal years 2025 and 2026 by 10% and 8%, respectively.
Despite this, the anticipated impact of the Redrow acquisition, which is expected to be low double-digit accretive, leads to an overall unchanged forecast for fiscal year 2025 and a 3% increase for fiscal year 2026.
The bank now projects that Barratt Developments' return on tangible equity (ROTE) will recover by one-third from the fiscal year 2024 to 2027, reaching 8.2%. This is a recovery from the 13.7% achieved in fiscal year 2019. The analysis suggests that this recovery does not indicate significant valuation upside at the current level.
The analyst further noted that Barratt's stock has underperformed compared to its closest peers by approximately 20% year-to-date. However, it is anticipated that the stock may outperform on a relative basis going forward.
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