The Barclays (LSE:BARC) share price surged in 2024. The stock has been one of the FTSE 100’s standout performers, delivering a 65% return over the past year and 110% over two years. Yet despite this stellar run, analysts see even more potential, with the bank combining robust fundamentals and compelling valuation metrics. Let’s take a closer look.
Still discounted versus global peer group
At 297p, Barclays trades at a forward price-to-earnings (P/E) ratio of 7.7 times for 2025 – significantly below the S&P 500 Financials sector’s 17.9 times. This discount persists even when considering the company’s strong earnings growth prospects.
Barclays’ earnings per share (EPS) is projected to rise steadily throughout the medium term:
| Year | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|
| EPS (£) | 0.348 | 0.4055 | 0.5058 | 0.5657 |
This 62% cumulative EPS growth through 2028 is fuelled by:
- Net interest income guidance of £12.2bn for 2025 (+9% yoy)
- Operating margin expansion to 38.3% in 2025 (from 30.3%)
What’s more, these earnings growth figures point to a P/E-to-growth (PEG) ratio of around 0.6. This suggests the stock is vastly undervalued. Likewise, Barclays has a reported price-to-book (P/B) value of 0.7 times. This is well below the benchmark of one, and far behind US peers — some of which trade with P/Bs around two.
What’s more, Barclays pays a strong dividend by global standards. While the yield has fallen to around 3% as the share price has risen, the coverage ratio now stands at 4.6 times. This provides plenty of safety for future dividend hikes. What’s more, these dividend-adjusted PEG ratio (factoring in both growth and yield) sits around 0.4.
Analyst consensus: bullish but cautious
The 17 analysts covering Barclays show measured optimism:
| Metric | Value |
|---|---|
| Average price target | 348.4p |
| High estimate | 395p (+33%) |
| Low estimate | 230p (-23%) |
| Consensus rating | Buy (9 Buy, 6 Outperform, 2 Hold) |
This broadly supports the valuation data above. However, there is an element of caution. Simply, the dividend-adjusted PEG ratio infers that the stock could be trading twice as high as it is today, and analysts don’t agree.
This might be a reflection of several things. The company’s operational resilience may be in question after February’s IT meltdown that has resulted in a £7.5m compensation bill. Likewise, impairment charges remain relatively high on a long-term basis. There could also be a limited fine related to motor finance mis-selling.
What’s more, Barclays is still a largely UK-facing bank. UK banking operations have actually been the business’s most efficient, with the bank planning to shift £30bn of risk-weighted assets towards the segment in the coming years. However, the UK is still a relative global laggard.
The bottom line
With analysts forecasting 17%-20% total returns (price appreciation + dividends) over the next year, Barclays shares offer both value and growth characteristics. Personally, I’m also bullish on Barclays. However, I fear macroeconomic issues and market forecasts will likely drag on the stock’s growth from here on. I also can’t see the Chancellor’s Budget being anything but a disappointment.
My conservative estimate sees Barclays pushing up to around 330p over the next 12 months. I already have a sizeable position in Barclays, but may add to it if an opportunity presents itself.
