That’s why Barratt Redrow (LSE: BTRW) is down 23% from its highest level in a year, but that doesn’t mean it’s one of the best FTSE buy shares. But that may be the case – it all depends on how much value is left in stock.

This is different from price, which is simply the price the market is willing to pay at any given time. Instead, value reflects the fundamental fundamentals of the core business.

So is there any value left here, and if so, how high could the stock go?

Short-term vs. long-term

Shares fell in the low term due to lower demand for UK housing and higher mortgage rates. The Halifax Mortgage Affordability Index shows that mortgage costs are 36.2% of earnings, well above the long-term average. In contrast, average two-year fixed-rate mortgage rates are 6.20% (75% loan-to-value) and 6.57% (90% loan-to-value), which are still significantly higher than pre-2022 levels. This remains a risk for equities.

However, the long-term picture looks more encouraging. Analyst forecasts predict further gentle reductions in interest rates in the medium term (until the end of 2028) as inflation continues to decline. This should augment buyer confidence in the market and augment affordability to a more normal level.

A wider impact on the housing market is expected as the Government moves closer to its target of building 1.5 million fresh homes by 2029. As affordability improves, a variety of initiatives are being launched for buyers, including shared ownership and mortgage guarantee schemes.

Taken together, these trends suggest that current weakness is cyclical rather than structural, and conditions are likely to improve over time.

Recent results highlight this theme

Barratt’s H1 2026 data released on February 11 highlights this contrast. Adjusted pre-tax profit fell 13.6% year-on-year to £199.9m as margins fell in a still feeble market.

However, the total number of completed apartments increased by 4.7% to 7,444 apartments, supported by higher rental volumes in the private sector. This reflects investment groups purchasing entire blocks or stages directly from a developer to create long-term rental assets.

Revenues rose 10.5% to £2.63 billion, accompanied by a 4.9% augment in average selling prices for wholly owned businesses to £357,800.

At the same time, Barratt’s confirmed cost synergies of £97 million and maintained a solid net cash position of £173.9 million. It also kept its full-year completion guidance unchanged at 17,200-17,800 homes.

All of this indicates that the company is currently holding steady while building clear operating leverage should conditions improve.

Where “should” you trade?

Discounted cash flow (DCF) analysis identifies where a stock should trade by projecting future cash flows and discounting them back to the present. The DCF models used by analysts vary – some more bullish than mine, others more bearish – depending on the variables used.

However, based on my DCF assumptions – which take into account a discount rate of 9% – Barratt shares are 53% undervalued at their current price of £3.75. This means the ‘fair value’ is around £7.98 – more than double what the stock is currently trading for.

This gap between current price and fair value is extremely critical to long-term investors. This is because asset prices tend to converge to their fair value over time.

As such, I certainly think this is one of the best FTSE 100 stocks to consider right now.

And if it weren’t for the fact that I focus on stocks generating high dividends, I would wonder about it myself.