Analysts calculate that its share price, which is still around 300p, is at least 70p less than the real value of the business.
The group announced on Wednesday that it had raised pre-tax profit 25% to £63.1m for the last six months of 2000. Turnover was up 22% to £629m. Analysts had been expecting a profit of between £50m and £59m.
Barratt's share price jumped 17p to 305p immediately after the announcement but analysts said this was still far below its real value, given the results and prospects of the group.
ING Barings analyst Jonathan Timms slammed the current share price as a "stupid valuation". He said: "If Barratt was a pound higher it would still be undervalued. It keeps delivering great results and if it keeps doing this, the share price must increase." Timms stated that Barratt's share price should be at least 370p. He said: "That's what it deserves when you look at its returns on capital and continuity of growth. But it hasn't attracted the headlines this year because it hasn't been involved in the consolidation. It's chosen to grow organically, which is even better." Peel Hunt analyst Stephen Rawlinson said the market would eventually catch on to the value to be gained in Barratt's shares.
He said the low valuation may be the result of a number of factors. He said: "The market either believes there's a disaster lurking around the corner, or doesn't believe the forecasts, or some institutions already have too many housebuilder shares." Chairman Frank Eaton said he was not worried by his company's low valuation. He said: "We are not seen as an acquisition target and there's possibly an element of that in the share price." Eaton said he was "well pleased" with the results. He was particularly enthusiastic about the company's completion rate, which was up 7% on the same period last year, when the housebuilding industry as a whole had suffered a 3% decrease.
He said: "We were the only major housebuilder to significantly increase market share." The average selling price rose 7% to 120,000 and Barratt has set up four new housing divisions and now has 340 sales outlets.
Eaton said prospects for this year were also very good with sales reservations for the six months to 31 December 2000 up 6% on 1999 levels and with forward sales amounting to £450m.