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At 200p, has the Barclays share price got further to rise?

Scene depicting the City of London, home of the FTSE 100
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The Barclays (LSE: BARC) share price has more than recovered since its stock market crash lows last year. In fact, it’s currently priced at around 200p, which is 80% higher than this time last year. This has been stronger than many of its main competitors, including Lloyds and HSBC. Such a strong recovery has mainly been due to a series of excellent results. As such, with the bank at a three-year high, should I be adding more to my portfolio?

Q3 trading update

The series of excellent results didn’t stop with its recent trading update. In the third quarter, it reported profits before tax of £2bn, and this means that year-to-date, it has profits before tax of £6.9bn. This can be contrasted to around £3bn in the full year of 2020. Accordingly, it’s clear that Barclays is performing excellently, and is even far exceeding pre-Covid levels.

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This is partly due to the company’s diversified business model, with the investment bank delivering excellent results once again. CEO Jes Staley also stated that he was “seeing evidence of a consumer recovery and the early signs of a more favourable rate environment”. This may mean that such a strong profit may not be a one-off.

Finally, there were updates on the share buyback programme, under which the company is in the process of returning £1.2bn to shareholders. This means that the number of outstanding shares is now around 16.8bn, as opposed to 17.4bn at the end of last year. Share buybacks such as these often improve the financial ratios of the company and can have a very positive effect on a share price. Therefore, it’s no surprise to me that the Barclays price has managed to hit 200p.

Other factors

Although these results are excellent, there are also a few risks that require consideration. For example, these profits have been highly dependent on the investment bank, while the retail bank business has faced more struggles. As such, if the investment bank doesn’t live up to expectations in the upcoming periods, profits could slump. The current economic environment in the UK is also fragile, and the Barclays share price is very dependent on a strong macroeconomic environment.

Even so, I feel that these risks are still already accounted for with the Barclays share price. In fact, according to the recent results, it currently trades on a price-to-earnings ratio of only around five. This implies a very cheap valuation, which is far lower than the FTSE 100 average of around 15.

There’s also the possibility that interest rates will rise soon due to current inflation levels in the UK. This is likely to have a positive effect on banks, as it can help increase the profitability of their lending businesses. This could see the stock rise further.  

What’s next for the Barclays share price?

All in all, I think the Barclays share price has further to rise. Its current results have been excellent, and this has given the stock a cheap valuation. As such, I’m tempted to add more shares to my portfolio.

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Stuart Blair owns shares in Barclays. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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