What’s next for the Barclays share price?

British bank notes and coins

Since its lows in March last year, the Barclays (LSE: BARC) share price has already managed to double in value to reach 180p. This has been driven by the stronger-than-expected economic recovery, and a set of strong financial results. But with headwinds still remaining, can the Barclays share price rise further, or has it reached its peak?

Financial results

Barclays’ financial results have been extremely strong, and this has helped demonstrate the excellent recovery the bank has made. Last year, these results were aided by the investment bank, which helped enabled the group to maintain profitability despite the difficult economic environment. This year, it has been able to increase profits further, thanks to significantly smaller credit impairment charges.

Indeed, for the first half of 2021, Barclays was able to post a profit before tax of £5bn, in comparison to just £1.3bn in the same period last year. This was also far larger than profits in the first half of 2019, illustrating its strong recovery.

The strong performance has also enabled it to increase its shareholder returns, which has had a positive effect on the Barclays share price. This has included a further share buyback programme of £500m, and a dividend per share of 2p. As such, it’s clear that it is performing well, and hopefully, this will continue well into the future.

Risks

Of course, this does not mean that there are no risks. Indeed, as the bank itself has pointed out recently, “the outlook remains uncertain and subject to change depending on the evolution and persistence of the COVID-19 pandemic”. The current prominence of the Delta variant is therefore an issue for the business.

Furthermore, the current low-interest-rate environment is also challenging for banks, and this may be holding back the Barclays share price. At the moment, there is also no indication that the Bank of England will increase the base rate.

Finally, the competition, especially from fintechs, is a worry. This may lead to the firm losing market share, which would disrupt growth.  

Can the Barclays share price rise further?

Despite these risks, I believe that they are priced into the Barclays share price already. Therefore, I believe that the business is still underpriced. In fact, it currently trades at a price-to-earnings ratio of around 6 and a price-to-book ratio of 0.25. Even for traditional banks, which are often valued lower than the rest of the market, this is incredibly cheap. Accordingly, I feel that Barclays does have a large amount of upside potential.

But unlike some growth stocks, I wouldn’t expect it to rise overly quickly. This is because the company is currently not growing at a quick enough rate, and it has already clawed back many of its stock market crash losses. The risk of rising competition also remains a threat, which may hold the share price back. Accordingly, I’d buy more Barclays shares as a solid FTSE 100 stock, which pays a decent dividend, rather than a stock that will explode in the near future.

The post What’s next for the Barclays share price? appeared first on The Motley Fool UK.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

More reading

Stuart Blair owns shares in Barclays. 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.

Leave a Reply

Your email address will not be published.