Is There Still Time To Buy Barclays PLC?

Can Barclays PLC (LON: BARC) move higher, or are the company’s shares overvalued?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

barclays

Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at Barclays (LSE: BARC) (NYSE: BCS.US) to ascertain if its share price has the potential to push higher. 

Current market sentiment

The best place to start assessing whether or not Barclays’ share price has the potential to push higher, is to take a look at the market’s current opinion towards the company.

Unfortunately at present, it would appear that the market is somewhat doubtful Barclays’ future plans, as the bank closes branches, cuts jobs, remains embroiled in the Libor scandal and surprisingly, increases bankers’ bonuses.

Further, investors are concerned about Barclays’ sliding profits. The bank’s full-year 2013 adjusted pre-tax profit declined 32%, led by a 9% slump in investment banking income and a 7% rise in operating expenses. Some investors are now wondering if the bank can return to growth. 

Upcoming catalysts

Still, Barclays’ management has big plans for growth and these should start to take hold over the next year or so.

Indeed, the bank’s operating costs should fall this year as management cuts 10,000 to 12,000 jobs, including 7,000 posts within the UK. What’s more, Barclays continues to progress with “Project Transform”, which is designed to streamline operations, increase profits and improve the bank’s reputation.

Further, after a rights issue last year to boost the bank’s capital cushion, Barclays now appears well capitalised. Specifically, at the end of 2013 Barclays had core tier 1 capital ratio of 13.2%, up from 10.8% in the same period the year before. Hopefully, this larger capital buffer means that the bank will not need to call on investors again for extra cash in near the future.  

Overall, 2013 was a year of unprecedented change for Barclays and it would seem as if 2014 is going to be another year of transformational activity at the bank. However, after the bank and its management have finished streamlining the business, profits should start to rise again.

Valuation

Unsurprisingly due to slumping profits, Barclays currently trades at a rock bottom valuation. In particular, Barclays’ shares currently trade at a forward P/E of on 8.7, falling to 7.1 for 2015. In comparison, the wider banking sector trades at an average P/E of 24.

Moreover, City forecasts currently predict that Barclays’ earnings will expand 67% during 2014 and then an additional 22% during 2015. This rapid rate of growth implies that Barclays’ shares currently offer growth at a reasonable price as they trade at a PEG ratio of 0.13 for 2014.  

Foolish summary

So overall, based on Barclays’ low valuation, cost cutting and robust balance sheet, I feel that there is still time to buy Barclays at current levels. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article. 

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

£9,000 in savings? That could become passive income of £19,175 a year

It's possible to invest affordable sums of money into building a big passive income stream. Here's how I'd go about…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Legal & General shares: a once-in-a-decade passive income opportunity?

Is a dividend yield at its highest level in a decade, combined with a strong record of increasing payouts, a…

Read more »

Investing Articles

With a 7% yield and 4.1 P/E, is this the best passive income stock on the FTSE 350?

Millions of Britons invest for a passive income. While our writer isn't buying this stock yet, he believes it's worth…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he's not keen…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could this brilliant airline stock be the most undervalued company on the FTSE 100?

Our writer believes this FTSE 100 stock may provide market-beating returns over the coming years, noting its undervalued metrics and…

Read more »