The Motley Fool

This growth stock could be a better buy than Barclays plc

It’s roughly 10 years since the beginning of the financial crisis and many private investors remain wary of banking stocks. When you consider the proliferation of scandals, giant fines and boardroom shake-ups since 2007, perhaps this isn’t all that surprising.

Nevertheless, it must be frustrating for holders of stock in FTSE 100 banking behemoth Barclays (LSE: BARC). Just when you think the company may be turning a corner and sentiment returning, momentum is lost. Trading at 250p last October, the last 12 months have seen the shares fall as low as 127p before recovering to trade today at just under the £2 mark.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Notwithstanding any impact from ongoing Brexit negotiations, a rise in base interest rates at the start of November could be the much-needed catalyst for a more sustained rise. Put simply, this will allow the £34bn-cap juggernaut to charge borrowers higher rates while paying only slightly more to savers – a state of affairs that will clearly help its bottom line.

Barclays still looks cheap in terms of its valuation. Trading on 11 times earnings for the current year, this reduces to just nine times earnings in 2018, based on current analyst growth estimates. Another positive is the great improvement in free cash flow in recent times, thereby making it highly likely that next year’s forecast 3.4% yield will be realised.  

But is there a better option?

It may lack Barclays’ history, but seven year-old challenger Metro Bank (LSE: MTRO) continues to win new admirers. Following a “strong trading performance” reflected in today’s Q3 update, I think it may also be a better choice for growth-focused investors.

Over the three months to the end of September, customer deposits at the £3.2bn-cap rose 10% to £955m. At £858m, lending was also 11% higher than seen in Q2. Perhaps most impressively, Metro reported a 77% jump (to £7.2m) in quarter-on-quarter profit, bringing year-to-date underlying pre-tax profit to £13.2m — a huge improvement on 2016’s £12.4m loss. 

When you consider just how popular the bank is becoming, the aforementioned figures make a lot of sense. Over Q3, Metro welcomed 79,000 more customers, bringing its tally of accounts to just over 1.1m — a 33% rise year-on-year. Much of this may be due to the company’s decision to buck the trend seen in the wider banking industry and open new branches. In addition to opening its 50th “store” over the reporting period, the bank has 17 more scheduled before the end of next year, lending substance to chairman Vernon Hill’s comment that Metro was giving customers “a real alternative and a reason to love their bank at last“. 

So is Metro a better growth pick than Barclays? So long as recent price momentum continues, my answer would be in the affirmative. Since coming to the market in March last year, shares have climbed almost 66% in value. With analysts already estimating a huge jump of more than 200% in earnings per share growth in the next financial year (and Metro likely to benefit as much as Barclays from a rate rise), I think the shares still warrant attention, even if a lot of positive news appears already priced in. The fact that the company was able to conduct a £278m placing of 8m ordinary shares in July, at no discount, should give an indication of just how confident the market appears to be on its outlook.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.