Advertisement
UK markets closed
  • FTSE 100

    7,895.85
    +18.80 (+0.24%)
     
  • FTSE 250

    19,391.30
    -59.37 (-0.31%)
     
  • AIM

    745.67
    +0.38 (+0.05%)
     
  • GBP/EUR

    1.1607
    -0.0076 (-0.65%)
     
  • GBP/USD

    1.2370
    -0.0068 (-0.55%)
     
  • Bitcoin GBP

    51,539.84
    -844.39 (-1.61%)
     
  • CMC Crypto 200

    1,371.97
    +59.34 (+4.52%)
     
  • S&P 500

    4,967.23
    -43.89 (-0.88%)
     
  • DOW

    37,986.40
    +211.02 (+0.56%)
     
  • CRUDE OIL

    83.24
    +0.51 (+0.62%)
     
  • GOLD FUTURES

    2,406.70
    +8.70 (+0.36%)
     
  • NIKKEI 225

    37,068.35
    -1,011.35 (-2.66%)
     
  • HANG SENG

    16,224.14
    -161.73 (-0.99%)
     
  • DAX

    17,737.36
    -100.04 (-0.56%)
     
  • CAC 40

    8,022.41
    -0.85 (-0.01%)
     

Does the Barclays share price make it a no-brainer buy for 2024?

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Image source: Getty Images

When I look at the Barclays (LSE: BARC) share price, I really wonder what’s holding investors back from buying.

I know there are reasons why bank shares are down right now. Barclays shares have actually ticked up a bit in the past few weeks too. And they’re about flat over five years, which is not quite a disaster.

Still, Barclays has still been an investment disappointment since even before the 2020 stock market crash. In fact, FTSE 100 banks in general have had a dreadful decade and more.

Weak share price

With earnings rising, forecasts put the stock on a price-to-earnings (P/E) ratio of only 5.5. And it could drop as low as four by 2026. And however we think we should value bank stocks, that just looks way too low to me.

ADVERTISEMENT

In results posted on 20 February, Barclays announced a new £1bn share buyback. what’s more, the board said it plans “to return at least £10bn of capital to shareholders between 2024 and 2026, through dividends and share buybacks, with a continued preference for buybacks.

The whole market cap is £25bn. So for any share we buy at today’s price, the bank wants to return the equivalent of 40% to us in the next three years. Who wouldn’t want a slice of that?

That there’s a preference for buybacks suggests the board sees the shares as cheap. But we still have forecast dividend yields of 5%, and rising, to look forward to.

Why so low?

The share price did perk up a bit on this news. But I’d say it’s barely a scratch on where the true valuation should be.

So why are the shares so low, and what are the risks? Well, I can’t pretend there aren’t any.

Barclays reported lower profits in 2023, with the final quarter looking tough again. The company also faced costs of restructuring into five key divisions. That’s supposed to result in costs savings and a workforce reduction. But we won’t know how it will work out for a while yet.

The bank is also the only UK one that still has a large investment banking arm. And that adds extra risk, at a time when the global economy is so uncertain.

I think Barclays’ structure and business spread is a good one. It does make the bank stand out as unique among its UK peers. But how it all works out will be crucial for where the share price goes.

No-brainer?

One day we’ll get back to low interest rates, falling bad debt risk, stable fuel prices and global economic growth. If Barclays shares were still about the same price when that happened, I think they really would be a no-brainer buy.

Between now and then, investors need to weigh up the low valuation with today’s risks.

For me, though, Barclays is firmly on my Stocks and Shares ISA buy list for when I next have the cash to invest.

The post Does the Barclays share price make it a no-brainer buy for 2024? appeared first on The Motley Fool UK.

More reading

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc. 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.

Motley Fool UK 2024