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Are Barclays PLC, IG Group Holdings plc And Investec plc Value Plays Or Value Traps?

Even though South Africa-focused bank Investec (LSE: INVP) is forecast to increase its bottom line by 9% this year and by a further 12% next year, its shares still trade on a very low rating. For example, they have a price-to-earnings (P/E) ratio of just 10.8, which indicates that they offer excellent value for money.

Clearly, there are concerns surrounding the prospects for the South African economy, with it due to grow at the slowest pace this year since the recession of 2009. While this is undoubtedly a risk to Investec’s financial performance, the company’s current valuation appears to adequately price this in. And with its shares yielding 4.8% from a dividend that’s covered nearly twice by profit, they continue to offer excellent income potential too.

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Certainly, volatility could be rather high for investors in Investec in the near term, but for long-term investors it remains a relatively enticing option within the financial services space.

Profit from volatility

On the topic of volatility, one company that will be hoping for similar levels seen since the turn of the year is spread betting business IG (LSE: IGG). That’s because investor interest in betting on the short-term movements of shares increases as their prices swing more violently, with IG likely to benefit in such a scenario.

With IG trading on a price-to-earnings-growth (PEG) ratio of 1.7, its shares appear to offer good value for money. That’s especially the case since it has proven to be a very reliable performer when it comes to earnings growth in recent years, with IG’s bottom line having risen in each of the last five years. Alongside this is a yield of 4.2%, which shows that as well as being a stock to potentially benefit from higher uncertainty, IG also offers a degree of stability via an above-average yield. This makes it a strong income, growth and value play for the long haul.

Stability ahead

Also being a value play rather than value trap is Barclays (LSE: BARC). Its shares have fallen by a whopping 31% since the turn of the year as investors have seemingly rallied against the bank’s new strategy. This includes plans to slash dividends and improve the bank’s financial standing, which in the long run are likely to lead to greater stability and potentially more resilient earnings growth.

Such a major fall in its share price has left Barclays trading on a P/E ratio of just 9 and with its bottom line due to rise by 36% next year, it has a forward P/E ratio of only 6.6. Although investor sentiment could worsen somewhat due to the bank’s new strategy in the short run, Barclays remains a very enticing long-term buy. That’s especially the case since the global economic outlook continues to improve and Barclays has a new strategy that could create a more robust and profitable bank in the coming years.

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Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.