Barclays shares are up 46%! But I think they still look dirt cheap

Barclays shares have been flying but this Fool thinks they’ve got more to give. Here he breaks down why.

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Global bank Barclays (LSE: BARC) has been a standout performer on the FTSE 100 this year. In 2024, its shares have climbed 46.2%. Wow.

For comparison, the Footsie is up ‘just’ 7.9% during the same period. If I’d invested in Barclays instead of buying an index tracker, it’s safe to say I’d be a happy investor.

Its impressive rise this year now means the stock has returned 42.2% over the last 12 months. As a long-term investor, I like to zoom out even further than that. Over the last five years, the stock is up a whopping 49.8%.

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Created with Highcharts 11.4.3Barclays Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But after soaring, I’d imagine some investors will be wondering whether Barclays’ share price is maxed out. And they may be pondering on whether right now is a smart time to consider buying some shares. I reckon so. Here’s why.

Bang for buck

Despite rising nearly 50% in five years, the stock still looks dirt cheap to me. There are a few reasons I say that.

Let’s start by looking at the key price-to-earnings (P/E) ratio. Barclays currently trades on a P/E of just 8.9. In my opinion, that looks like a steal. What’s more, its forward P/E is just 6.9.

In all fairness, some context is needed here. All UK banks look like good value for money on paper right now. But at 8.9, Barclays sits way below the Footsie average of 11. And for a business of its quality, the stock looks like it could be great bang for my buck at its current price.

Then there’s its price-to-book (P/B) number. Today, the firm’s P/B is just 0.5, where 1 is deemed fair value. Again, based on that, Barclays looks like it holds the potential to be a cracking buying opportunity.

Big future plans

But aside from its attractive valuation, I’m also excited to see how the bank could perform over the coming years after announcing a strategic overhaul in its 2023 results. As part of this, the firm plans to trim up to £2bn in costs by 2026.

To help reach that, Barclays has laid out plans to streamline its operations moving forward. From now, the bank will operate under five divisions.

That should, according to the firm, help boost efficiency. We’ve already seen it make moves elsewhere to simplify its ops, such as selling its German consumer finance branch back in July.

The risks

As exciting as that sounds, restructuring always comes with risk. Should Barclays fail to reach its targets, that would no doubt leave shareholders disappointed.

On top of that, I’m expecting some volatility in the months ahead. That’s largely due to interest rate cuts. The Bank of England recently held the base rate at 5%. However, many are predicting more cuts this year. Should they happen, that will shrink Barclays’ margins, which is another threat.

One to consider

But I’m happy to ride some short-term ups and downs where I see long-term value. And at its current price, I do with Barclays.

What’s more, there’s a healthy 3.6% dividend yield on offer. That passive income could come in handy should its share price experience periods of volatility.

With that in mind, I think Barclays is a stock investors should consider buying today.

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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.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc. 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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