Shares in Berkeley Group Holdings LON:BKG are starting to develop some worryingly negative trend characteristics, plus the core metrics generated by the company’s last set of results show it struggling to keep up with peers in its sector. The shares have lost over 24% in value in the last six months alone and have given up 16% versus where they were last December.
Berkeley Group is adapting to a shifting market, facing challenges like high build costs, complex planning processes, and regulatory pressures such as the UK Building Safety Act, which is expected to reduce profit margins by 1-2%.
However, the company remains well-positioned, thanks to a robust land acquisition strategy that focuses on long-term regeneration projects and partnerships with landowners. Berkeley’s pivot to out-of-London locations reflects its ability to anticipate market trends and secure lower-cost opportunities.
- Games Workshop’s conquest continues with record profits and licensing boom
- Best-performing FTSE 100 stocks in 2024
- Our Market Predictions for 2025: Bitcoin, Gold, Mag 7, China and more
Property market analysts say that sustainability and regulatory compliance remain central to Berkeley’s operations. By adopting proactive measures like future-proofing designs to meet evolving standards, the company mitigates risks associated with shifting legislation.
Berkeley’s ethical practices and strong relationships with suppliers have also insulated it from global supply chain disruptions, positioning Berkeley as a trusted leader in the UK housing market.
“Berkeley’s build-to-rent strategy offers potential, with its first completion expected in FY27,” said Yanmei Tang, an analyst with Third Bridge. “While this sector may yield lower margins than traditional build-to-sell, it diversifies Berkeley’s portfolio and caters to growing demand for rental properties. However, the company faces competition from rivals expanding across the UK, particularly in northern cities like Manchester and Leeds, where Berkeley’s presence is limited.”
Market consolidation trends could pose challenges for Berkeley. Mergers such as Redrow-Barratt might create larger competitors with better borrowing rates and increased buying power.
Analysts say that staff retention is also an emerging concern for Berkeley, following internal consolidation and a perceived shift from a family-run culture to a corporate environment.
Don’t expect much from Berkeley shares next quarter
Shares in Berkeley are looking relatively fairly priced. The stock has been a strong performance in its price to book ration when compared to the sector but net change in cash came in disappointingly weak. Historically, the correlation between these mixed results and the likelihood of the stock outperforming the property and housing sectors is inconsistent at best.
Some silver lining came from the reported revenue growth in the last set of results, but there was also the decrease in earnings per share to take account of. EBITDA and free cash flow were some other positives for shareholders to take away with them.
Berkeley has some work to do if it is to keep up with peers like Persimmon or indeed Vistry (see below).
Source: Bridgewise
Looking at the momentum situation for Berkeley stock we see can see the shares breaking trend quite acutely. Trend Intelligence shows from its analysis that key price overlay indicators (uppermost chart) are strongly negative when viewed through the lens of three year analytics.
The lower three charts show Trend’s proprietary momentum indicators. All three show Berkeley stock as developing distinct negative characteristics.
Overall, Trend Intelligence said that Berkeley is looking overwhelmingly negative at the moment at 91.7 sell signals vs a mere 8.3% positives and no neutral.
