Image source: Getty Images
I FTSE 100You’ve enjoyed a year of good profits, yet it’s always full of great bargains.
Barratt Redrow (LSE:BTRW) is one that caught my eye this January. With low earnings multiples and price-to-book (P/B) ratios, and huge dividend yields, I think it might be too cheap to miss.
Want to know why? Read on.
FTSE trading fee
Housebuilder Barratt has had a tough few years, as high interest rates dampen demand for new homes. But profits are expected to rise again from 2026, especially as the Bank of England is expected to continue lowering its lending benchmark.
This means that Barratt shares trade with a price-to-earnings growth (PEG) ratio of 0.1 for this year. Any reading below 1 suggests a share price that is undervalued by expected earnings growth.
Furthermore, the builder’s PEG reading remains low, at 0.4 in both 2027 and 2028.
I’m not surprised by City analysts’ rosy earnings forecasts (they suggest 98% growth this year). Interest rates are going down, as I say, but that’s part of the story. Accelerating competition in the mortgage market is also helping to rekindle demand for homes.
Moneyfacts says “Expectations are high for a booming market in 2026“. This follows the news that mortgage options have reached their highest level since 2007, with 7,158 options. As challenger banks intensify their attacks on traditional banks and building societies, pent-up housing demand is slowly opening up.
Too cheap to pass up?
Barratt Redrow is the UK’s biggest housebuilder, so it is in the box seat to capitalize on booming housing demand. It plans to build between 17,200 and 17,800 homes this financial year, and eventually increase this to 22,000 a year in the medium term.
Of course there are risks to these goals. A long-term slowdown in the UK economy, coupled with rising unemployment may impact any sales gains. It may therefore bring back inflationary pressures that could limit interest rate cuts in the future.
But in comparison, I think Barratt deserves serious consideration, and especially at its share price at current levels. It looks cheap based on expected earnings, as I have shown, while its P/B ratio is also very low. This remains below the value limit of 1 again, at 0.7.
The FTSE 100-beating dividend yield of 4.2% for 2026, and rising to 4.7% and 6.2% in 2027 and 2028 respectively, makes an attractive investment case.
Bottom line
I hold Barratt Redrow shares in my portfolio, along with other major housebuilders Persimmon again Taylor Wimpey. I have held on to them despite the pressures of the past years, and I plan to hold on to them for a long time to come.
With a full global bank – with 100,000 sites, or 6.2 years of supply – this FTSE 100 company is well placed in my opinion to take advantage of the UK’s growing population. I expect it to deliver strong returns over the next decade.
