BTRW: Margin Resilience And Cash Generation Will Support Future Share Performance

Analysts raised their price target for Barratt Redrow to a range of 530 to 575 GBp from 510 to 550 GBp, citing slightly lower growth assumptions offset by marginally stronger profit margin expectations and a modestly reduced discount rate that together support a higher valuation multiple.

Analyst Commentary

Recent target price increases from bullish analysts reflect confidence that Barratt Redrow can deliver on margin resilience and cash generation, even as top line growth expectations moderate. The updated target range suggests that the market is willing to assign a higher valuation multiple to the group’s earnings profile, supported by operational discipline and a more constructive view on sector risk.

Bullish Takeaways

Bullish analysts highlight that the raised price targets signal growing conviction that Barratt Redrow can defend and gradually expand profit margins, supporting a higher earnings base over the medium term.
The tighter and higher target range is seen as evidence that execution risk around the integration of operations and delivery of cost synergies is declining, which some analysts view as justification for a richer valuation multiple.
Higher targets also incorporate expectations that a stabilising macro and interest rate backdrop will underpin demand, allowing the company to convert its land bank into steady volume growth without sacrificing pricing discipline.
Analysts view the modestly reduced discount rate as a sign that perceived balance sheet and sector risk is easing, which in turn supports a more constructive view on long term cash flows.

Bearish Takeaways

Bearish analysts remain cautious that the uplift in valuation may be running ahead of near term earnings delivery, particularly if housing market volumes recover more slowly than anticipated.
There is concern that further margin expansion could prove difficult in a still cost sensitive environment, which could limit upside to current profit forecasts and constrain the potential for a higher valuation multiple.
Some analysts flag that a more supportive discount rate assumption leaves less room for error if macro conditions or financing costs were to deteriorate again, which could put pressure on the current valuation range.
Uncertainty around planning timelines and regulatory changes is cited as an ongoing execution risk that could delay growth projects and weigh on free cash flow, which would challenge the sustainability of higher target prices.

What's in the News

CFO Mike Scott stepped down with immediate effect on 13 November 2025. Micheal Passmore has been appointed as interim Deputy CFO overseeing core finance functions and reporting to the CEO (Key Developments)
Shareholders approved the adoption of new Articles of Association at the AGM held on 5 November 2025, signaling updates to the company’s governance framework (Key Developments)
The AGM also approved a final dividend of 12.1 pence per ordinary share for FY25, confirming an increase versus the prior year (Key Developments)
The board recommended a total FY25 dividend of 17.6 pence per share, up from 16.2 pence in FY24, in line with a payout ratio of 1.75 times adjusted earnings per share, with the final dividend scheduled for payment on 14 November 2025 to shareholders on the register at 10 October 2025 (Key Developments)

Valuation Changes

The fair value estimate has fallen slightly to 4.96 from 5.09, reflecting marginally lower embedded growth expectations.
The discount rate has edged down to 8.79 percent from 8.81 percent, indicating a modest reduction in perceived risk to future cash flows.
The revenue growth assumption has decreased modestly to 7.36 percent from 7.57 percent, pointing to a slightly more cautious top-line outlook.
The net profit margin has risen slightly to 8.11 percent from 8.08 percent, signalling incremental confidence in margin resilience.
The future P/E multiple has declined moderately to 15.89 times from 16.27 times, suggesting a marginally lower valuation being applied to forecast earnings.

The merger of Barratt and Redrow brings synergies that enhance margins and operational efficiency, improving earnings.
Strategic land bank expansion and strong reservation trends predict increased home completions and future revenue growth.
Integration complexities, planning delays, safety obligations, and operating challenges could pressure Barratt Redrow's margins, earnings, and financial performance.

Catalysts

About Barratt Redrow

Engages in the housebuilding business in the United Kingdom.What are the underlying business or industry changes driving this perspective?

The combination of Barratt and Redrow has created opportunities for cost and revenue synergies, with cost synergies upgraded from £90 million to £100 million. This is expected to positively impact net margins in the future.
The focus on integrating the businesses operationally and systematically is expected to streamline operations, reduce costs, and improve earnings, enhancing operational efficiency.
Barratt Redrow is increasing its capabilities to buy larger sites, enhancing its strategic land bank, which could lead to higher revenue from increased home completions in the future.
Stabilization of reservation trends and strong reservation rates, particularly an improvement in year-on-year net basis by 5%, indicates potential for future revenue growth as the housing market stabilizes.
Guidance for full-year home completions has narrowed and moved upwards, suggesting expectations of higher revenue and potential upward revisions to consensus earnings forecasts.

Barratt Redrow Earnings and Revenue Growth

Barratt Redrow Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Barratt Redrow's revenue will grow by 13.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 2.6% today to 8.7% in 3 years time.
Analysts expect earnings to reach £584.7 million (and earnings per share of £0.39) by about September 2028, up from £120.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as £490.0 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.2x on those 2028 earnings, down from 41.9x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 13.0x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

Barratt Redrow Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The combination of Barratt and Redrow presents complexities, such as the purchase price allocation and related fair value adjustments, which could pose integration challenges and impact the adjusted operating margin and overall profitability.
Operating margins have been affected by lower completion volumes and changes to the sales mix, leading to a decline in adjusted gross profit and operating profit, which could continue to pressure earnings if not managed effectively.
The land bank has increased in duration due to the current planning environment, and any delays in planning approvals could lead to slower outlet growth and impact future revenues.
There are ongoing financial obligations related to the remediation of legacy buildings and safety provisions, which could affect net margins and free cash flow if costs rise or if additional regulatory requirements are imposed.
The uncertainty and potential implementation of the building safety levy, along with its associated costs, could impact financial projections and margins, presenting a risk to cash flow and financial performance.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £5.213 for Barratt Redrow based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £6.4, and the most bearish reporting a price target of just £4.4.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £6.7 billion, earnings will come to £584.7 million, and it would be trading on a PE ratio of 16.2x, assuming you use a discount rate of 8.4%.
Given the current share price of £3.55, the analyst price target of £5.21 is 31.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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