The Motley Fool

Hurry! The Lloyds share price buying opportunity is closing fast

Sometimes I feel like I have been shouting it from the rooftops for months. Lloyds Banking Group (LSE: LLOY) is a great screaming buy!

Good call

That’s how it looks to me anyway, trading at a dirt-cheap valuation of just 7.7 times forward earnings and with a forecast yield of a mighty 6.1%. Those look like fire-sale numbers to me, yet Lloyds is far from a burnt-out case.

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...

Maybe I’ve been a bit premature, though. I was bigging up the stock a year or so ago, and its share price has fallen 20% since then. It trades 30% lower than it did five years ago. I can scream about this amazing buying opportunity all I like, but actual performance has been nothing to shout about. Can that change?

Not Brexit again

The big concern is that Lloyds has greater domestic UK exposure than any of the big banking names, earning the majority of its revenues by taking deposits and lending money to personal and small business customers. This puts it in the front line of the slowing UK economy and all the uncertainty that Brexit brings.

Slowing economic growth, stagnating wages, and rising indebtedness all threaten Lloyds, with no respite from overseas.

There are other worries too, as Edward Sheldon points out here. Lloyds has so far set aside a flabbergasting £19.2bn to cover PPI mis-selling claims and could take a further hit if there is a last-minute rush before the final claims deadline on 29 August. Lean and hungry Fintech (financial technology) upstarts and a rash of new challenger banks also pose a growing threat.

British could be best

Naturally, volatility in October and December wreaked havoc on the share price. But Lloyds has fought back, its stock up 11% in the last month. The buying opportunity may be closing, although for a complete re-rating, we need more Brexit clarity.

A growing army of advisers and analysts reckon that UK equities look a real bargain right now, as the B-word destroys investor sentiment. I would put Lloyds high on that list and it could recover rapidly if a no-deal, cliff-edge departure is averted.

Lucky numbers

That forecast yield of 6.1% has generous cover of 1.9, and is forecast to hit 6.4% next year. Operating margins are a healthy 43.5%, so it shouldn’t be short of cash. Its P/E of 7.7 is half the FTSE 100 average of 15.72. The latest price-to-book value is just 0.8, a further sign that Lloyds may be trading at discounted levels.

It won’t be plain sailing, though. Forecast revenue figures suggest stagnation for the next two or three years, while profits could even slip slightly.

Trap or treat?

Perhaps I was wrong to shout myself hoarse about Lloyds. My Foolish colleague Royston Wild reckons it’s a classic value trap

Yet I continue to believe that today’s entry price offers long-term investors the opportunity to buy into a hugely generous long-term dividend income stream. I’ll stop shouting now. Anybody seen my throat sweets?

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...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.