Barclays (LSE: BARC) shares have soared 51% over the past year, climbing from 317.8p to 486.5p as I write on Wednesday (17 June).
Despite that remarkable run, the stock is still sitting 14% below its 52-week high of 554.1p. So is there still value on the table, or has the easy money already been made?
How does the valuation compare?
The stock is up a tidy 183% in the last five years. That’s the result of a steady turnaround since chief executive C.S. Venkatakrishnan took over in November 2021.
These efforts have focused on cost discipline, building a stronger capital position, and generating steadier returns across the group’s different operating divisions.
After a period of such strong gains, the obvious question is whether the shares are now fully valued, or if there is still an opportunity for investors like me sitting on the sidelines.
One way to assess the stock is by comparing the relative valuation to some of its key peers in the sector. Looking at the company’s price-to-earnings (P/E) ratio of 11.3 shows it trading at a discount to the likes of Lloyds and HSBC right now.
Here’s how the company stacks up against these two banking peers:
| Barclays | Lloyds | HSBC | |
| Share price | 486.5p | 104p | 1,410.2p |
| P/E ratio | 11.3 | 13.5 | 15.6 |
| Dividend yield | 1.8% | 3.7% | 3.9% |
If that valuation gap were to close, and the price simply returned to its 52-week high from February 2026, that would imply upside of roughly 14% from here. But is that discount justified, or is this a genuine opportunity to buy on the cheap?
What are the risks?
There are some real reasons for caution when it comes to both Barclays and banking stocks in general. If interest rates were to fall further that could squeeze net interest margins and banking profits. I would expect that to knock the company’s valuation down.
Barclays also carries significant investment banking exposure compared to some of its peers. Revenues in this segment are notoriously volatile and can swing sharply with market activity.
And as a major UK lender, a domestic economic downturn could also put both loan book growth and loan impairments under pressure.
Set against that, the dividend yield of 1.8% is modest, so investors are leaning heavily on share price growth to generate returns.
My verdict
The valuation gap is interesting, and clearly the Barclays turnaround under Venkatakrishnan has already generated handsome returns for investors.
Despite the discount to both its 52-week high and key peers, the banking sector is a bit too sensitive to the state of the economy for my liking. That’s why I’m not looking to buy the stock right now.
I’ve got my eye on other opportunities in less economically exposed sectors that could help me to diversify my portfolio further this year.
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Ken Hall does not hold any positions in the companies mentioned.
