In March 2024, I penned an article on this website titled: “Now might be the last chance to buy Lloyds shares under 50p.”
I thought I identified a few key reasons why the Lloyds (LSE: LLOY) share price looked undervalued. I even said the 50p share price might be seen as an “obvious low” in years to come. So what happened?
Well, Lloyds shares now sit at 101p. They’ve shot up to a 17-year high. Investors have seen the value of the shires rise by more than double and collected a few handsome dividends along the way too.
What’s more, I believe that many of the same factors that were true then are true now. Put simply, the near-£1 Lloyds share price might look just as cheap as that sub-50p one did. Here’s why I think the stock is worth considering.
No crystal ball
First things first, I am certainly no modern-day Nostradamus. Like even the best of investors, I get ones wrong along with the ones I get right. In the interest of balance, I’ll cite a notable loser of mine: alcoholics drinksmaker Diageo – down close to 40% over the same period.
In a similar vein, the general performance of global markets and the FTSE 100 has been strong over the period too. Had the Footsie not booked years of 7% and 21% in 2024 and 2025 respectively then I doubt my prediction would be looking quite so prophetic.
The markets are at record highs as we speak. A downturn – perhaps from that long-awaited and much predicted ‘AI stock market crash’ – could undermine my previous claims too. Any investor can make themselves look good by cherry-picking the high points rather than the general trend.
Looking ahead
Are Lloyds shares going to repeat the trick then? No one can say for sure, but the shares are still trading at cheap valuations, as they have done for most of the time since the Great Recession. It’s understandable for investors to be cautious after such a reckless collapse, but the days of the ‘ghosts of 2008’ might be numbered.
Lloyds shares trade at around 11 times forward earnings. This is significantly cheaper than its counterparts across the Atlantic, and is even a good sight of a discount on the long-term FTSE 100 average of around 15. Perhaps most pertinently, the earnings forecasts for the years ahead are set to bring that figure down further.
Another boon for Lloyds shares is higher interest rates. When borrowing is too low, banks don’t make much of a margin on their products. When borrowing is too high, the sector has to handle more defaults on debts. The current levels are something of a ‘goldilocks zone’ at the moment. They seem to be coming down more slowly than many had anticipated too.
