Global bank Barclays (LSE: BARC) has been a standout performer on the FTSE 100 this year. In 2024, its shares have climbed 46.2%. Wow.
For comparison, the Footsie is up ‘just’ 7.9% during the same period. If I’d invested in Barclays instead of buying an index tracker, it’s safe to say I’d be a happy investor.
Its impressive rise this year now means the stock has returned 42.2% over the last 12 months. As a long-term investor, I like to zoom out even further than that. Over the last five years, the stock is up a whopping 49.8%.
But after soaring, I’d imagine some investors will be wondering whether Barclays’ share price is maxed out. And they may be pondering on whether right now is a smart time to consider buying some shares. I reckon so. Here’s why.
Bang for buck
Despite rising nearly 50% in five years, the stock still looks dirt cheap to me. There are a few reasons I say that.
Let’s start by looking at the key price-to-earnings (P/E) ratio. Barclays currently trades on a P/E of just 8.9. In my opinion, that looks like a steal. What’s more, its forward P/E is just 6.9.
In all fairness, some context is needed here. All UK banks look like good value for money on paper right now. But at 8.9, Barclays sits way below the Footsie average of 11. And for a business of its quality, the stock looks like it could be great bang for my buck at its current price.
Then there’s its price-to-book (P/B) number. Today, the firm’s P/B is just 0.5, where 1 is deemed fair value. Again, based on that, Barclays looks like it holds the potential to be a cracking buying opportunity.
Big future plans
But aside from its attractive valuation, I’m also excited to see how the bank could perform over the coming years after announcing a strategic overhaul in its 2023 results. As part of this, the firm plans to trim up to £2bn in costs by 2026.
To help reach that, Barclays has laid out plans to streamline its operations moving forward. From now, the bank will operate under five divisions.
That should, according to the firm, help boost efficiency. We’ve already seen it make moves elsewhere to simplify its ops, such as selling its German consumer finance branch back in July.
The risks
As exciting as that sounds, restructuring always comes with risk. Should Barclays fail to reach its targets, that would no doubt leave shareholders disappointed.
On top of that, I’m expecting some volatility in the months ahead. That’s largely due to interest rate cuts. The Bank of England recently held the base rate at 5%. However, many are predicting more cuts this year. Should they happen, that will shrink Barclays’ margins, which is another threat.
One to consider
But I’m happy to ride some short-term ups and downs where I see long-term value. And at its current price, I do with Barclays.
What’s more, there’s a healthy 3.6% dividend yield on offer. That passive income could come in handy should its share price experience periods of volatility.
With that in mind, I think Barclays is a stock investors should consider buying today.
