Barclays’ (LSE: BARC) share price rose 3.5% yesterday (22 October) following the release of its Q3 2025 results.
A key bullish factor was the surprise announcement of a £500m share buyback, which tends to support share price gains.
The bank added that it will now move to quarterly share buyback announcements. The switch away from annual or semi-annual announcements increases transparency for investors.
Another positive element was a guidance increase for 2025’s return on tangible equity (ROTE) to ‘more than 11%’, from ‘around 11%’ previously. For 2026, it targets a figure of 12%+.
Like return on equity, ROTE is calculated by dividing the company’s net income by average shareholders’ equity. However, ROTE excludes intangible elements such as goodwill.
Positive as well was the raising of its 2025 guidance for net interest income (NII) to £12.6bn+ from £12.5bn+. NII is the difference between the money received from loans and paid out on deposits.
A risk to the bank is that increasing competition in the sector could reduce its profit margins.
That said, total income in Q3 rose 9% year on year to £7.167bn. This marked an 11% rise in the first nine months of this year over the same period last year — to £22.063bn.
Meanwhile, Q3’s profit after tax dropped 6% to £1.712bn. However, over the first nine months of this year, the number has risen 12%, to £5.742bn.
How does the price-to-value proposition look?
Despite the rise in price in Barclays’ stock to near 15-year highs, there could still be plenty of value left in it.
This is because a share’s price and value are not the same thing. Price is whatever the market is willing to pay at any point. But value reflects the true worth of the underlying business.
The gap between the two is where big, long-term profits lie, in my experience. This comprises several years as a senior investment bank trader and decades as a private investor.
This is because any asset’s price tends to converge to its ‘fair value’ over time, although this is not guaranteed.
I have found the best way to ascertain this value is the discounted cash flow (DCF) method.
This is because it is a standalone valuation, unlike the comparative ratios popular with some investors.
These are subject to broad over- or undervaluations of the sector in which a stock operates. And these can significantly distort the true valuation picture of individual shares.
Instead, the DCF pinpoints the price where any stock should trade, based on cash flow forecasts for the underlying business.
For Barclays, the DCF shows it is 49% undervalued at its current £3.81 price.
So, its fair value is £7.47.
Comparative valuations with its peers confirm its present bargain-basement price.
For example, Barclays’ 8.8 price-to-earnings ratio is bottom of its competitor group, which averages 10.9. This comprises NatWest at 9, Standard Chartered at 9.4, Lloyds at 12.2, and HSBC at 12.7.
My investment view
I already hold shares in HSBC and NatWest, so owning another in the same sector would unbalance my portfolio.
However, I think Barclays’ strong performance over the year to date should continue to drive earnings increases. And it is ultimately these that power any firm’s share price higher over time.
Consequently, I think the stock is well worth the consideration of other investors.
