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Barratt Developments plc (LON:BDEV), might not be a large cap stock, but it saw a decent share price growth in the teens level on the LSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Barratt Developments’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Barratt Developments
What Is Barratt Developments Worth?
Barratt Developments appears to be overvalued by 37% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£4.54 on the market compared to my intrinsic value of £3.32. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Barratt Developments’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Barratt Developments look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Barratt Developments, at least in the near future.
What This Means For You
Are you a shareholder? If you believe BDEV should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on BDEV for a while, now may not be the best time to enter into the stock. you may want to reconsider buying the stock at this time. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?