Despite trading near a 15-year high after yesterday’s Q3 results, Barclays’ share price could still have this much value left in it…
Barclaysâ (LSE: BARC) share price rose 3.5% yesterday (22 October) following the release of its Q3 2025 results.
A key bullish factor was the surprise announcement of a £500m share buyback, which tends to support share price gains.
The bank added that it will now move to quarterly share buyback announcements. The switch away from annual or semi-annual announcements increases transparency for investors.
Another positive element was a guidance increase for 2025âs return on tangible equity (ROTE) to ‘more than 11%’, from ‘around 11%’ previously. For 2026, it targets a figure of 12%+.
Like return on equity, ROTE is calculated by dividing the companyâs net income by average shareholdersâ equity. However, ROTE excludes intangible elements such as goodwill.
Positive as well was the raising of its 2025 guidance for net interest income (NII) to £12.6bn+ from £12.5bn+. NII is the difference between the money received from loans and paid out on deposits.
A risk to the bank is that increasing competition in the sector could reduce its profit margins.
That said, total income in Q3 rose 9% year on year to £7.167bn. This marked an 11% rise in the first nine months of this year over the same period last year — to £22.063bn.
Meanwhile, Q3âs profit after tax dropped 6% to £1.712bn. However, over the first nine months of this year, the number has risen 12%, to £5.742bn.
How does the price-to-value proposition look?
Despite the rise in price in Barclaysâ stock to near 15-year highs, there could still be plenty of value left in it.
This is because a shareâs price and value are not the same thing. Price is whatever the market is willing to pay at any point. But value reflects the true worth of the underlying business.
The gap between the two is where big, long-term profits lie, in my experience. This comprises several years as a senior investment bank trader and decades as a private investor.
This is because any assetâs price tends to converge to its âfair valueâ over time, although this is not guaranteed.
I have found the best way to ascertain this value is the discounted cash flow (DCF) method.
This is because it is a standalone valuation, unlike the comparative ratios popular with some investors.
These are subject to broad over- or undervaluations of the sector in which a stock operates. And these can significantly distort the true valuation picture of individual shares.
Instead, the DCF pinpoints the price where any stock should trade, based on cash flow forecasts for the underlying business.
For Barclays, the DCF shows it is 49% undervalued at its current £3.81 price.
So, its fair value is £7.47.
Comparative valuations with its peers confirm its present bargain-basement price.
For example, Barclaysâ 8.8 price-to-earnings ratio is bottom of its competitor group, which averages 10.9. This comprises NatWest at 9, Standard Chartered at 9.4, Lloyds at 12.2, and HSBC at 12.7.
My investment view
I already hold shares in HSBC and NatWest, so owning another in the same sector would unbalance my portfolio.
However, I think Barclaysâ strong performance over the year to date should continue to drive earnings increases. And it is ultimately these that power any firmâs share price higher over time.
Consequently, I think the stock is well worth the consideration of other investors.
The post Despite trading near a 15-year high after yesterdayâs Q3 results, Barclaysâ share price could still have this much value left in it⦠appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of Motley Fool Money. Simon Watkins has positions in HSBC Holdings and NatWest Group Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, Lloyds Banking Group Plc, and Standard Chartered Plc. 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.
