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FTSE 100-member Barclays is down 20% in 1 year. Here’s what I’d do now

The last year has been a trying time for investors in Barclays (LSE: BARC). The company’s share price has declined by over 20%, with it showing little sign of mounting a successful recovery.

Investors seem to be concerned about the bank’s future prospects. However, it appears to offer improving profit growth forecasts, with its valuation now seemingly attractive. With dividend growth potential, it could generate improving total returns in the long run.

As such, it could be worth buying alongside another FTSE 100 company that released an encouraging trading update on Friday.

Low valuation

The stock in question is prime housebuilder Berkeley Group (LSE: BKG). Its performance between 1 November 2018 and 28 February 2019 has been encouraging, despite continued challenging trading conditions. It has been able to invest in its brand during the period, as it seeks to deliver on its long-term development sites.

It anticipates having a net cash position as at 30 April that is around the same level as it was at its half-year results. It continues to offer a generous shareholder returns policy, with share buybacks being undertaken and the company expected to yield over 5% in the current financial year.

With Berkeley Group trading on a price-to-earnings (P/E) ratio of around 10.4, it seems to offer good value for money at the present time. While trading conditions may remain challenging as the Brexit process could now be extended, from a long-term perspective the stock appears to offer a strong position within what may prove to be a resilient growth market. As such, now could be the right time to buy it.

High return prospects

With the Barclays share price having declined heavily in the last year, the stock now appears to offer good value for money. It trades on a P/E ratio of just 7.2, which suggests that it has a wide margin of safety.

Clearly, investors are unsure about the future growth potential offered by the bank. While global economic risks remain in play, as well as potential disruption from Brexit, the company is expected to post a rise in net profit of 13% in the current year. This suggests that the changes which have been made under its new CEO are having a positive impact on its financial outlook, with there being the potential for further growth in the coming years.

With improving profit potential, Barclays is expected to deliver a rising dividend. It is due to yield 4.8% in the current year, while dividend cover of 2.9 times indicates that it can afford to pay out a higher portion of profit as a dividend. This puts the company in a strong position from an income perspective, and it could mean that the bank gradually becomes an increasingly appealing dividend share. Combined with its growth and value investing potential, this means that now could be the right time to buy it.

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Peter Stephens owns shares of Barclays and Berkeley Group Holdings. 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.