Even the high-flying HSBC (LSE: HSBA) share price couldn’t withstand recent stock market turbulence. It’s slumped just over 7% in the last week. That’s a modest drop, with the shares still up 40% over the last 12 months, and 90% over five years (plus a heap of dividends on top). But is it still worth taking advantage of it?
HSBC shares have looked cheap for several years, judging by its price-to-earnings (P/E) ratio. That’s still the case today, with the P/E now at a lowly 9.03 times and well below long-term average FTSE 100 P/E of around 15 times.
Is now a good time to buy this FTSE 100 star?
It’s not as much of a bargain when measured by price-to-book value, which sits at exactly one, suggesting fair value. But with operating margins of 44.6% set to rise to 48.7% next year, there’s room for profits to grow.
HSBC has long been one of the FTSE 100’s most generous income stocks, and 2025 looks no different. The bank is forecast to yield 5.9% this year, rising to a juicy 6.33% in 2026. Better still, those payouts are comfortably covered twice by earnings.
On top of that, HSBC has been rewarding investors with share buybacks, announcing plans for another $2bn programme in February.
While HSBC’s long-term strategy has served it well, new CEO Georges Elhedery has set out to streamline the business. He plans to cut $1.5bn in costs by the end of next year. As part of this, the bank’s winding down its investment banking and equity capital markets business in the West, doubling down on corporate and institutional clients in Asia and emerging markets.
Dividends, share buybacks and growth
Q4 results were mixed, with reported revenues dropping 11% to $11.6bn. That was largely down to FX-related losses from divesting its Argentine unit, presumably a one-off. Profit before tax still rose $1.3bn to $2.3bn, beating expectations.
HSBC can’t escape today’s geopolitical uncertainty, as the recent share price dip shows. But it’s proving surprisingly nimble. HSBC’s splitting operations into Western and Eastern divisions, but there’s no question where its heart lies.
A couple of years ago I resisted buying HSBC because I feared it risked getting ripped apart by the US/China superpower rift. That seems less of a worry now that it’s taken sides. This is a play on the BRICs, not the West.
The 17 analysts covering HSBC have produced a median 12-month price target of 948p. This suggests just an 8.5% rise from current levels. Obviously, forecasts can’t be relied upon, but this confirms my view that investors can’t expect another stellar year. A quick glance at the news headlines confirms that.
I still think HSBC’s well worth considering for investors who hope to turn today’s stock market volatility to their long-term advantage. But they should also accept that their capital is at risk. And the next few years will be bumpy as globalisation wanes and the world retrenches into different trading blocs.
HSBC will have to remain nimble to survive that tectonic shift. Iinvestors can quietly reinvest their dividends while they wait for it to play out.
