Shareholders in British bank Barclays (LSE: BARC) have had a rough few months, because the Barclays share price has tumbled since mid-January. As a result, Barclays shares have been one of the FTSE 100‘s worst performers this calendar year. However, I’m hopeful that the ‘blue eagle’ bank’s stock will rebound — and perhaps even exceed its 52-week high.
The Barclays share price crumbles
The past five years haven’t been great for the Barclays share price: it has slumped by 30.6% since 28 April 2017. Of course, it got smashed along with the wider market during the market meltdown of March 2020. But from April 2020 to mid-January this year, Barclays shareholders enjoyed bumper returns as this stock skyrocketed.
At its 2022 peak on 14 January, the Barclays share price hit an intra-day high of 219.6p, its highest level since April 2018. But it has since crashed almost 73p to hit 146.62p as I write. That’s a collapse of a third (-33.3%) in under 100 days. Yikes.
As a result, here’s how Barclays shares have performed over five timescales: five days +2.1%, one month -15.2%, year to date -21.7%, six months -26.3%, and one year -19.6%. Obviously, this is unwelcome news to long-suffering shareholders. But buying at the current Barclays share price means buying the bank’s future, not its shares’ past performance. And, at current price levels, I think Barclays stock is too low-priced.
I see Barclays as too cheap
One of my all-time favourite investors, American mega-billionaire Warren Buffett, once remarked, “Price is what you pay. Value is what you get.” What the ‘Oracle of Omaha’ and famed value investor is saying is that it’s perfectly okay to pay fair prices to buy into decent businesses. And, despite its recent hiccups — including this awful £450m loss — I see value in the current Barclays share price.
At the current share price of 146.62p, the Barclays group is valued at just £24bn. To me, that’s a modest price tag for a leading UK retail bank (with a profitable investment bank thrown in). Indeed, were I as rich as, say, Warren Buffett or ‘technoking’ Elon Musk, I’d happily buy the entire group at this price.
I’d buy Barclays today
At their current price, Barclays shares trade on an historic price-to-earnings ratio of four and bumper earnings yield of 25%. However, forward forecasts lower these figures to 5.5% and 18.2% respectively, but still very much in value territory for me. Also, the dividend yield of 4.1% a year is slightly ahead of the FTSE 100’s expected cash yield of around 4% for 2022. Again, the forecast dividend yield of 5.4% a year is even higher.
In summary, I believe that there is plenty of deep value hidden in the Barclays share price today. That’s why I’d happily buy BARC at the current share price, both for future capital gains and passive income. And then I’d hope that my four main worries — the Covid-19 pandemic, Russia/Ukraine, China, and interest rates — don’t worsen and cause global stocks to slide again!
