Image source: Getty Images
Shares in Blue Eagle Bank Barclays (LSE: BARC) are living up to their name as they continue to fly. They have soared 25.6% in the last 12 months alone.
Today, one share of the world power would cost me 191.7p. It can't be just me who thinks this looks like an absolute bargain.
Cheap as chips
At that price, it means its shares are trading at a paltry price-to-earnings (P/E) ratio of 7.1. To be fair, this may not seem like a bargain when compared to its UK peers. For example, Lloyd's also has a P/E ratio of 7.1, while NatWestis 5.7.
However, when compared to its international competition, Barclays stands out. It is considerably cheaper than J.Morgan, which has a P/E of 12.2. It also looks like good value for money when put side by side Bank of America (12.1).
What's more, it is also expected to become cheaper in the coming years. Its forward P/E is expected to fall to just over five by 2025.
It's time to turn around
That said, there is an explanation why investors can buy Barclays so cheap today. It has fallen behind in recent years when it comes to effectively using its assets.
Investors can verify this by looking at its return on tangible capital, which for 2023 was 10.6%. To put it in context, Lloyds's returned 15.8%.
While that's a problem, it's satisfying to see the steps the bank is taking to turn it around. Namely, chief executive CS Venkatakrishnan has laid out plans for a strategic review, the first of its kind within the business since 2016.
The firm is set to implement multiple initiatives as part of this. It strives to reduce costs as it targets £2bn in gross efficiency savings by 2026.
Additionally, it will be split into five divisions: UK Consumer, US Consumer, Corporate, UK Investment and Private & Wealth. He hopes that this measure “provide improved and more granular disclosure of performance” and be key to driving responsibility throughout the company.
£10 billion reward
But there is another reason why, at its reduced price, I see Barclays shares as an attractive buy. The stock provides passive income through its 4.2% dividend yield. Dividends are never guaranteed, but the company has put an emphasis on rewarding shareholders, which is always encouraging to see.
Last year it returned £3bn to investors, which was a 37% increase on the previous year. Looking ahead, it wants to recoup £10bn over the next three years through dividends and share buybacks.
time to buy
I am a shareholder in Barclays after opening a position for the first time last summer. Since then I have been slowly increasing my holdings and have made a paper profit of 34.6% to date.
However, I'm still eager to purchase more stocks with the extra money I have. The market is clearly optimistic that Barclays will prosper in the coming years. And while implementing its strategic plans will pose challenges, if the business pays off, I am confident that its price can continue to rise.
In my opinion, Barclays looks too cheap to pass up. I think investors should also seriously consider buying some shares.
