Why Barclays PLC Provides Spectacular Value For Money


In this article I am highlighting why I believe Barclays (LSE: BARC) (NYSE: BCS.US) is a tremendous pick for those seeking stock market bargains.

Price to Earnings (P/E) Ratio

Although Barclays has recorded persistent earnings turbulence in recent years, the bank is tipped to finally put the lingering woes of Barclaysthe 2008/2009 financial crisis behind it and post solid gains from this year onwards.

Based on current earnings projections the business currently deals on bargain P/E multiples of 9.8 and 8 for 2014 and 2015 correspondingly, comfortably below the value threshold of 10 times prospective earnings and smashing a forward average of 15.2 for the complete banking sector.

Price to Earnings to Growth (PEG) Ratio

Indeed, these optimistic forecasts have investors expecting a gargantuan 50% earnings rise in 2014, bouncing from last year’s 56% dip. And Barclays is expected to follow this up with a further 24% rise in 2015.

Any PEG reading below 1 is generally considered terrific value, so Barclays’ multiples of 0.2 for 2014 and 0.3 for 2015 underline the company’s modest share price relative to its growth prospects.

Market to Book Ratio

Once total liabilities are subtracted from total assets, this leaves Barclays with a book value of £63.9bn. This figure produces a book value of £3.20 per share, which in turn creates a market to book ratio of 0.8.

A figure around or below 1 can be considered tremendous value, so Barclays’ current share price represents exceptional bang for your buck when tallied up against the firm’s ‘bricks and mortar’ value.

Dividend Yield

A background of surging earnings growth over the next two years is expected to facilitate exceptional growth in the full-year dividend, and Barclays is anticipated to get its progressive payout policy back on track this year having left the payout on hold at 6.5p per share in 2013.

Forecasters expect Barclays to raise the dividend to 8.3p per share in 2014 before lifting it to 11.5p next year. This year’s payment creates a yield of 3.3% — easily surpassing a corresponding reading of 3% for the entire banking industry — while expectations of a hefty hike in 2015 pushes the yield to a monster 4.7%.

A Bumper Banking Bargain

Based on all the medium term metrics discussed above, in my opinion Barclays offers stunning value for money for both growth and income hunters. And with the firm’s extensive restructuring drive, resurgent operations on the UK High Street and expanding presence in African emerging markets also pulling up trees, I believe that the bank is also a strong contender for solid long-term earnings growth.

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Royston does not own shares in Barclays.