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The Barclays (LSE:BARC) share worth surged in 2024. The inventory has been one of many FTSE 100’s standout performers, delivering a 65% return over the previous yr and 110% over two years. But regardless of this stellar run, analysts see much more potential, with the financial institution combining sturdy fundamentals and compelling valuation metrics. Let’s take a better look.
Nonetheless discounted versus world peer group
At 297p, Barclays trades at a ahead price-to-earnings (P/E) ratio of seven.7 instances for 2025 – considerably beneath the S&P 500 Financials sector’s 17.9 instances. This low cost persists even when contemplating the corporate’s robust earnings progress prospects.
Barclays’ earnings per share (EPS) is projected to rise steadily all through the medium time period:
| 12 months | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|
| EPS (£) | 0.348 | 0.4055 | 0.5058 | 0.5657 |
This 62% cumulative EPS progress by way of 2028 is fuelled by:
- Internet curiosity revenue steerage of £12.2bn for 2025 (+9% yoy)
- Working margin growth to 38.3% in 2025 (from 30.3%)
What’s extra, these earnings progress figures level to a P/E-to-growth (PEG) ratio of round 0.6. This implies the inventory is vastly undervalued. Likewise, Barclays has a reported price-to-book (P/B) worth of 0.7 instances. That is nicely beneath the benchmark of 1, and much behind US friends — a few of which commerce with P/Bs round two.
What’s extra, Barclays pays a robust dividend by world requirements. Whereas the yield has fallen to round 3% because the share worth has risen, the protection ratio now stands at 4.6 instances. This offers loads of security for future dividend hikes. What’s extra, these dividend-adjusted PEG ratio (factoring in each progress and yield) sits round 0.4.
Analyst consensus: bullish however cautious
The 17 analysts masking Barclays present measured optimism:
| Metric | Worth |
|---|---|
| Common worth goal | 348.4p |
| Excessive estimate | 395p (+33%) |
| Low estimate | 230p (-23%) |
| Consensus score | Purchase (9 Purchase, 6 Outperform, 2 Maintain) |
This broadly helps the valuation knowledge above. Nevertheless, there is a component of warning. Merely, the dividend-adjusted PEG ratio infers that the inventory might be buying and selling twice as excessive as it’s as we speak, and analysts don’t agree.
This is perhaps a mirrored image of a number of issues. The corporate’s operational resilience could also be in query after February’s IT meltdown that has resulted in a £7.5m compensation invoice. Likewise, impairment costs stay comparatively excessive on a long-term foundation. There is also a restricted fantastic associated to motor finance mis-selling.
What’s extra, Barclays continues to be a largely UK-facing financial institution. UK banking operations have really been the enterprise’s best, with the financial institution planning to shift £30bn of risk-weighted property in direction of the section within the coming years. Nevertheless, the UK continues to be a relative world laggard.
The underside line
With analysts forecasting 17%-20% complete returns (worth appreciation + dividends) over the subsequent yr, Barclays shares provide each worth and progress traits. Personally, I’m additionally bullish on Barclays. Nevertheless, I concern macroeconomic points and market forecasts will seemingly drag on the inventory’s progress from right here on. I can also’t see the Chancellor’s Price range being something however a disappointment.
My conservative estimate sees Barclays pushing as much as round 330p over the subsequent 12 months. I have already got a sizeable place in Barclays, however could add to it if a chance presents itself.
