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why value investors have been eyeing Barclays stock?

Barclays Group in 2019 – What Has Happened and What’s to Come?

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Barclays Group – and the entire market – suffered a tough year in 2018 with the widespread contraction. That said, analysts are confident that a rebound is headed this way to help overcome recent past challenges.

Bloomberg Gives the Nod

Even after a challenging 2018, Bloomberg still gave Barclays the coveted designation of being among the top 50 companies to watch this year. As 2019 began, it recommended that investors keep their eye on this possibility for a substantial opportunity.

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Despite previous doubts. Barclays CEO Jes Stanley kept his position. The doubt stemmed from the string of layoffs, legal challenges, and the $2 billion settlement the group faced with the United States Department of Justice.

Having survived those problems, Stanley led the bank back into profitability once again at the start of this year.  It was this recovery that turned the heads of Bloomberg and other investors who may otherwise have continued to be afflicted with frustration with Barclays.  This, combined well with the investment potential in the bank since, based on price-earnings ratios, it became one of the cheapest banks in the E.U.

Value Investors Give the Nod

Barclays has been especially appealing to value investors in 2019. This is true regardless of the figures used to examine the Barclays PLC stock performance and potential.  When looking at the PE ratio, P/S ratio, and various scores, it is clear why value investors are heavily drawn to this stock right now.

Barclays Price to Earnings Ratio

Most value investors begin by looking at a Price to Earnings Ratio (PE ratio) since it is among the most popular financial ratios. In Barclays’ case, its PE ratio illustrates how the stock has been performing, how it compares to the average across the industry, and how it compares to the entire market.

Its 12 month PE ratio is 7.16.  When comparing that figure to the rest of the market, this shows favorably for Barclays. For example, at the same time, the S&P 500 had a 17.80 PE ratio. Turning to the long-term PE trend, looking at Barclay’s current figure shows that it is lower than the last half decade’s midpoint. It is also quite far below the highs the stock has seen, suggesting that there is a considerable value investment opportunity sitting there.

Also notable is that Barclays’ PE ratio compares favorably with the trailing 12 month PE ratio for the sector. That figure at the same time was 13.66, indicating that when compared with its peers, the Barclays stock may be undervalued at the moment.

Barclays has a forward PE ratio of only 6.76. This indicates that as the year progresses, the stock could continue moving along a more value-oriented path.

Barclays Price/Sales Ratio

After the PE ratio, many value investors will take a closer look at the Price/Sales ratio (P/S ratio).  Indeed, the PE ratio offers a strong place to start, but it should work in conjunction with what can be interpreted from the P/S ratio and not on its own.  After all, sales figures are harder for a firm to alter using accounting strategies than it is to tinker with earnings numbers.

At the moment, the P/S ratio for Barclays is sitting near 1.23.  That is considerably lower than the S&P 500’s average of 3.20.  Equally, it is also much lower than the highs for the stock over the last few years. Since Barclays is inside its P/S metric time span’s lower end, it can also be interpreted as a possible trade undervaluation when compared with its historical norms.

Taking a Wider Look

The Zacks Value Style Score for Barclays is an A. This designation means that Barclays’ stock is included among the top 20 percent of those considered for that scoring.  It also points to a high potential opportunity for value investors.  That point is further strengthened by the bank’s PE ratio and P/S ratio.

Other key metrics that underscore the investment opportunity held by this stock include the bank’s PEG ratio, which is only 1.11. When compared to the industry average of 1.40, Barclays’ is significantly lower.  Beyond that, the P/CF ratio – quite a strong indicator of value – for Barclays sits at 5.15 at the moment.  That is considerably better than the industry average of 7.92.  Even when looking at the stock from multiple angles, the potential for Barclays stock for value investors is a strong one.

Other Points to Consider for Barclays 2019

Even as all the value investment metrics point to Barclays’ stock as highly promising, there are broader considerations to think about before making a final decision. For example, the stock currently has an F Growth grade, which must be kept in mind.  Furthermore, it has only a C Momentum score.  These grades have brought Barclays’ Zacks VGM score to only a C.

Barclays has also seen varied recent earnings estimates, which should not be overlooked.  This year, only one of its estimates has increased and that was within the last couple of months.  Looking beyond that, it has seen two lower earnings estimates. The current estimates for the next 12 months are that there won’t be any further upward earnings but that there will be three downward revisions.

As a result, the consensus estimate has fallen by 4 percent over the last few months.  At the same time, the upcoming year experienced a 5.8 percent estimate reduction. This downward direction explains why Zacks has assigned Barclays a Rank #3 (Hold) and why value investors are looking to BCL stock for near-future in-line performance.

The Bottom Line

It’s perfectly clear why value investors have been eyeing Barclays stock. The ratios and metrics point directly to a considerable opportunity.  Equally, it’s important to remember that it has a Zacks Rank of #3 and is included among the bottom 28 percent in its industry rank. Following two back to back years in which the entire market has under-performed, it’s particularly important to act strategically on these types of opportunity.

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Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.