Is it time to double down on the Barclays share price?

After recent declines, the Barclays share price looks cheap. But is now really the time to buy, or should investors stay away?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Barclays (LSE: BARC) share price has crumbled in value this year. Shares in the lender have fallen nearly 50% year-to-date. Following these declines, the stock looks attractive from a value perspective. However, with risks to the global economy growing, the outlook for the banking group is highly uncertain.

As such, today, I’m going to take a look at the Barclays share price to establish if it’s worth buying at current levels, or investors should steer clear. 

The Barclays share price uncertainty

The most significant risk facing Barclays is the second wave of coronavirus. A second wave and national lockdown could pile further pain on the UK economy, which is already reeling from the first lockdown. 

Should you invest £1,000 in Computacenter Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Computacenter Plc made the list?

See the 6 stocks

The bank’s second-quarter trading update showed how much of an impact the first lockdown had on the group’s customers.

Barclays set aside £3.7bn to cover bad loans as a result of the coronavirus crisis. A second shutdown could see the bank dramatically increase this estimate. That would further hurt the group’s profitability and solvency.

That said, despite these losses, regulators and analysts agree that Barclays’ financial position is robust. While rising loan losses are disappointing, the lender’s work since the financial crisis to strengthen its balance sheet should ensure that it can take the losses in its stride. 

Therefore, it looks to me as if the bank is unlikely to collapse even in the worst-case scenario. 

Nevertheless, low-interest rates and loan losses may continue to weigh on profits for some time. This could be the biggest challenge facing the business. The Barclays share price is unlikely to return to previous levels until profits start to grow again. That could take some time. 

What’s more, depressed profitability may limit the group’s dividend potential. 

Value opportunity

Considering all of the above, I think the outlook for the Barclays share price is uncertain. 

That being said, it looks to me as if much of this uncertainty is already reflected in the stock. Indeed, shares in the lender are currently trading around the same level they were at the height of the financial crisis. Even though the bank is in a significantly stronger position than it was 12 years ago. 

The stock also looks cheap from a fundamental as well as price perspective. It’s trading at a price-to-forward (P/E) earnings multiple of 7.3, and a price-to-book (P/B) value of 0.3. These numbers suggest the shares offer a wide margin of safety at current levels. They also back up my belief that most of the bad news is already reflected in the Barclays share price. 

So, all in all, while Barclays is facing an uncertain outlook, the stock looks very cheap at current levels. As such, risk-tolerant, long-term investors who can look past the bank’s current problems, might be able to profit from buying the shares at current levels.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Barclays. 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.

More on Investing Articles

Businessman with tablet, waiting at the train station platform
Investing Articles

Here’s the growth forecasts for Next shares through to 2028!

Next's shares have risen in price again after another forecast-raising trading statement. Is the FTSE 100 company a white hot…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 145%, this investment trust has a P/E ratio of 10. Is it still a bargain?

The long-term track record of this investment trust has been excellent. Our writer thinks it could still be a bargain…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

These 3 dividend shares are on fire but they’re still dirt-cheap and pay piles of income!

Harvey Jones is hugely impressed by 3 FTSE 100 dividend shares that have managed to deliver on two key fronts,…

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

9% yield! Is this one of the best dividend stocks to consider buying right now?

With signs the worst for it might be over, dividend investors should add B&M European Value to their lists of…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Down 26% in 3 months! What’s going on with the Alphabet share price?

Stock market investors sold off Alphabet (NASDAQ:GOOG) shares heavily yesterday. Is this a worry or a timely buying opportunity to…

Read more »

Queen Street, one of Cardiff's main shopping streets, busy with Saturday shoppers.
Investing Articles

Here’s why the Next share price is rising again today

The Next share price keeps climbing, but should investors like me consider buying? Roland Head looks at today’s news and…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 850% in 3 years and the Rolls-Royce share price still won’t stop! See what the forecasts say now

Harvey Jones says Rolls-Royce shares continue to defy gravity. Yet this leaves investors facing a tricky decision over whether to…

Read more »

Artillery rocket system aimed to the sky and soldiers at sunset.
Investing Articles

Down 23% but with forecast annual earnings growth of 30%+ and new contracts just signed, should investors consider buying this FTSE 250 defence gem?

This FTSE 250 defence firm just signed two major new contracts, has excellent earnings growth prospects, and looks like a…

Read more »