Up 42% but with a P/E of just 8.1! Can anything stop the Barclays share price?

The soaring Barclays share price has grabbed the attention of Harvey Jones because it still looks great value despite its strong recent run. Time to buy?

| 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.

Image source: Getty Images

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.

The Barclays (LSE: BARC) share price has had a good run, climbing 42.89% in the last 12 months. Given its storming success, I expected it to be expensive. Yet its current price-to-earnings ratio is just 8.19, roughly half the FTSE 100 average of 15.4 times.

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

The shares also look cheap judging by the price-to-book ratio, which stands at just 0.5. That’s exactly half the figure of 1 that’s seen as fair value. This suggests Barclays has more room to grow.

Of course, metrics like these are far from infallible. Financial services stocks have looked underpriced for years. The financial crisis still casts a shadow. Post-Brexit negativity about the UK economy didn’t help. Nor did the cost-of-living crisis. 

Should you invest £1,000 in Osb Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Osb Group made the list?

See the 6 stocks

The shares still look cheap

While rising interest rates boosted banks’ net interest margins, a key measure of profitability, they also made investors fret about a recession and rising debt impairments.

I’ve felt for some time that the negativity has been overdone. Especially since the UK recession was relatively short-lived, house prices didn’t crash, and the banks’ debt impairment provisions weren’t needed.

FTSE 100 banks have had a good year generally. The NatWest Group share price is up 41.22% over 12 months. Lloyds Banking Group shares are up 31.03%. Both look cheap too, trading at 6.83 and 7.64 times earnings respectively.

Some investors reckon the discounted cash flow (DCF) method is the best method of judging a stock’s potential. On this score, Barclays looks tip-top, undervalued by 68%. That compares to 60% for Lloyds and 39% for NatWest.

Judging by these various metrics, Barclays shares could have a lot further to go. Again, they’re not infallible. We may just have to accept their lower valuations, and look for better measurements of their potential.

Brokers remain optimistic about Barclays. Analysts covering the stock have set an average 12-month price target of 272.3p. That’s up 20.26% from today’s price.

Banks are much less riskier than they used to be, having built solid capital buffers since the financial crisis. During last year’s banking meltdown, the sector was an oasis of calm.

Riskier stock, but more rewarding

Yet Barclays carries a bit more risk than Lloyds and NatWest, because it still retains an investment banking arm. That ups the potential rewards too. I hold Lloyds shares but sometimes wonder if they’re a little stolid.

One downside of the recent Barclays shares surge is that the yield is pretty so-so at 3.53%. Markets forecast this will hit 3.84% in 2024 and 4.16% in 2025. It’s still not to-die-for though.

In 2023, Barclays posted full-year sales of £25.38bn. Worryingly, growth looks sluggish with analysts forecasting only a small hop to £25.88bn this year, and then a bigger jump to £27.36bn in 2025.

The shares are also at the mercy of macro factors such as the state of the global economy and how fast central bankers cut interest rates. Lower rates will squeeze margins, which have already started to fall, especially in the mortgage market where competition is intense.

I’d happily buy Barclays shares despite these risks. The only thing holding me back is that I already have plenty of exposure to this sector through Lloyds.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Osb Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Osb Group made the list?

See the 6 stocks

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.

Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group 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

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »