Barclays (LSE: BARC) (NYSE: BCS.US) is a company that I’m pretty excited about at the moment.
The main reason for this is the super growth prospects that are currently being forecast by the market, with earnings per share (EPS) expected to grow by 22% in 2014 alone.
This means that Barclays should most certainly be considered a growth stock and, I believe, has the potential to increase its earnings not only next year but in future years, too.
Of course, the last few years have been tough for shareholders like me, with earnings taking a tumble during the credit crunch. However, things now seem to be on the up and growing earnings could lead to improved sentiment and, ultimately, a higher valuation.
However, strong growth potential is not the only reason why I’m optimistic about being a Barclays shareholder.
Indeed, I feel that shares currently offer great value and, when combined with the previously mentioned growth prospects, could be subject to a considerable upward rerating in the medium to long term.
Shares currently trade on a P/E of just 9, which compares very favourably to the wider banking sector and to the FTSE 100. They trade on P/Es of 16.5 and 15 respectively and I believe that the current discount placed on Barclays could narrow in future.
In addition, market sentiment has been subdued since Barclays announced its £5.8 billion rights issue. This is understandable, since although the rights issue was almost entirely taken up by those shareholders who were able to do so, it created uncertainty and cast a degree of doubt over the bank’s current situation.
However, now that the demands of the new regulator, the FCA, have been met (in terms of minimum capital ratios) Barclays can now move forward and it would be of little surprise to me if the market did not pick up on the progress made by the bank and warm to its current plight. In other words, buying now could mean investing before a considerable pickup in sentiment.
So, I’m bullish on Barclays because of the high market forecasts for earnings growth over the next year, the very low relative valuation placed on the company using the P/E ratio as well as the potential for improved sentiment in future.
> Peter owns shares in Barclays.