It’s been a tough year for investors in Barclays (LSE: BARC) (NYSE: BCS.US). Shares are currently down over 19% during the last year, which compares unfavourably with the FTSE 100’s capital gains of over 3%. However, does this share price fall mean that Barclays is now attractively priced? Moreover, can it be considered a super growth stock even though earnings have failed to grow in the last five years?
Strong Growth Prospects
Despite Barclays delivering a profit in each of the last five years, it has arguably been overlooked by many investors in recent months. However, its growth prospects over the next two years suggest that it should be much more popular amongst the investment community in future, since it is forecast to increase earnings per share (EPS) by 67% in 2014 and then by 22% in 2015. This is a stunning growth rate and is well in excess of the mid-single digit growth offered by the wider index. Barclays truly is a strong growth play.
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Good Value
However, does growth come at too high a price? Barclays’ price to earnings (P/E) ratio suggest not, with the bank currently trading on a P/E of just 8.3. This is well-below the FTSE 100’s P/E of around 13.5 and highlights the attractive absolute and relative value that Barclays offers, with there being considerable scope for an upward rerating that could deliver capital gains for shareholders over the medium term.
Indeed, when Barclays’ P/E ratio and growth forecasts are combined to give the price to earnings growth (PEG) ratio, Barclays looks very attractive. That’s because it’s PEG ratio (P/E ratio divided by forecast growth in EPS) is just 0.2, which is extremely low and shows not only that Barclays is a great growth stock but is also excellent value at current price levels.
Looking Ahead
With the prospects for the UK economy seeming to improve week-by-week, Barclays could prove to be a great growth play in the coming years. Certainly, it has not performed well over the last year and has considerably underperformed the wider index, but a relatively low valuation and very strong growth prospects over the next two years mean it could be a strong performer. As such, Barclays should be considered a super growth stock.
