Shares in Blue Eagle Bank Barclays (LSE: BARC) are living up to their name as they continue to fly. They’ve soared 25.6% in the last 12 months alone.
Today, a share in the global powerhouse would set me back 191.7p. It can’t be just me who thinks that seems like an absolute steal.
Cheap as chips
At that price, it means its shares are trading on a measly price-to-earnings (P/E) ratio of 7.1. In all fairness, that may not seem like a bargain when comparing it to its UK peers. For example, Lloyds also has a P/E ratio of 7.1, while NatWest’s is 5.7.
However, when stacking it up against its international competition, Barclays stands out. It’s considerably cheaper than JP Morgan, which has a P/E of 12.2. It also looks like good value when put next to Bank of America (12.1).
What’s more, it’s also expected to get cheaper in the years to come. Its forward P/E is forecasted to drop to just above five by 2025.
Time to turnaround
That said, there is one explanation why investors can pick up Barclays for such a cheap price today. It has fallen behind the pack in the last few years when it comes to effectively using its assets.
Investors can see this when looking at its return on tangible equity, which for 2023 was 10.6%. For context, Lloyds’s was 15.8%.
While that’s an issue, it’s pleasing to see the steps the bank is taking to change this. Namely, CEO CS Venkatakrishnan has laid out plans for a strategic overhaul, the first of its kind within the business since 2016.
The firm is set to implement multiple initiatives as part of this. It’s striving to cut costs as it aims for £2bn of gross efficiency savings by 2026.
Furthermore, it’s splitting up into five divisions: UK Consumer, US Consumer, UK Corporate, Investment, and Private & Wealth. It hopes this move will “provide an enhanced and more granular disclosure of performance” and be key in boosting accountability across the business.
£10bn reward
But there’s another reason why at their slashed price I see Barclays shares as an attractive buy. The stock provides passive income through its 4.2% dividend yield. Dividends are never guaranteed, but the business has put emphasis on rewarding shareholders, which is always encouraging to see.
Last year it returned £3bn to investors, which was a 37% increase from the year prior. Looking ahead, it wants to return £10bn over the next three years through dividends and share buybacks.
Time to buy
I’m a shareholder in Barclays after first opening a position last summer. I’ve been slowly adding to my holdings since, and, to date, I’ve made a paper gain of 34.6%.
Nevertheless, I’m still eager to pick up some more stock with any spare cash I have. The market is clearly optimistic that Barclays will thrive in the years to come. And while implementing its strategic plans will come with challenges, should the business deliver then I’m confident that its price can keep rising.
Barclays looks too cheap to pass on, in my opinion. I think investors should strongly consider buying some shares as well.
