Barclays Group: A 2019 Overview

Though last year was a tough year for the market, including for Barclays Group as a year of contraction. Analysts feel that a rebound is on the way that will help recover investor performance frustration.

One to Watch in 2019

After a tough 2018, Barclays was labeled by Bloomberg as one of the top 50 companies to watch in 2019.  At the start of the year, investors were told to pay attention to this potential opportunity.  CEO Jes Staley remained in place following a stream of legal challenges, layoffs, and even a $2 billion settlement with the United States Department of Justice. That said, as 2019 began, the bank returned to profitability once more.  This encouraged Bloomberg and investors to take a second look.  There was particular potential in the bank as, based on price-earnings ratios, it was among the cheapest European banks.

Value Investors Take Notice

Value investors have been particularly drawn to Barclays. This technique requires investors to focus on certain key financial ratios and metrics.  When examining Barclays PLC’s stock, it becomes clear why value-oriented investors are taking notice at the moment.

PE Ratio

The Barclays Price to Earnings Ratio (PE ratio) is a traditional place to start. This is because it is considered to be among the most popular financial ratios in the world.  When examining Barclays, this ratio is used to understand where the stock has been, how it compares to the industry average, and how it compares to the market as a whole. In Barclay’s case, it has a trailing 12 months PE ratio of 7.16.  Compared to the rest of the market as a whole, this compares quite favorably.  For instance, the S&P 500 PE ratio at the same time is about 17.80.  When shifting focus over the long term PE trend, the current level places Barclays lower than the midpoint over the last half decade.  Furthermore, its current level is well below the stock’s highs.  This indicates that it could be a very promising time for value investors. Moreover, the Barclays stock PE ratio holds a favorable comparison with the sector’s trailing 12 months PE ratio, which is at 13.66.  This suggests that, at a minimum, the stock is currently being undervalued in comparison with its peers. It’s also important to remember that Barclays has a forward PE ratio (price relative to the earnings of the current year) of only 6.76.  Therefore, it’s safe to say that when it comes to Barclays stock when moving forward in 2019, it could be taking a slightly more value-oriented direction.

P/S Ratio

A second core metric to consider is the Price/Sales ratio. While considering the PE ratio is solid, many investors prefer to work with it alongside the P/S ratio.  The reason is that when taking sales into account, it is much tougher to use accounting magic to manipulate those figures than it is to tweak earnings. Currently Barclays’ P/S ratio is around 1.23.  This is notably lower than the 3.20 of the S&P average.  Moreover, it is also considerably below the stock’s highs from the last few years. As Barclays is within the lower end of its range within the P/S metric time span, this also indicates potential undervaluing in trading in comparison with its historical norms.

Broad Value Barclays Outlook

Overall, Barclays’ Zacks Value Style Score is A.  This places its stock within the top 20 percent of all those covered.  It also indicates that value investors should consider Barclays to be a high potential opportunity.  This is only underscored by the other key metrics examined for value investing. For instance, Barclays’ PEG ratio is only 1.11. This level is quite a bit lower than the 1.40 industry average. Furthermore, the P/CF ratio – which is a powerful value indicator – currently scores at 5.15 for Barclays, which is much better than the 7.92 industry average.  Once again, this shows even more angles promising this stock as a powerful value investment.

Barclays Stock in 2019

It’s important to remember that while ratios do suggest that Barclays is a strong choice for value investors, there remain many other considerations to take into account before making the final decision. For one thing, its Growth grade is F, which can’t be ignored, and its Momentum score is C.  As a result, the Zacks VGM score for Barclays is only a C. Also worth noting are the company’s recent earnings estimates as they have been varied at best.  Throughout 2019, there has been one estimate that has gone higher in the past sixty days.  Comparatively, there have been two lower.  Estimates for the next year are that there won’t be any upward, but there will be three downward revisions within the same span of time. This has caused a 4 percent drop in the current year consensus estimate over the last couple of months.  Equally, there has been a 5.8 percent estimate drop over the next year.  This negative trend explains why Barclays has been assigned a Zacks Rank #3 (Hold) and why investors are seeking near-future in-line performance from BCL stock.

Takeaway

Value investors definitely have their eye on Barclays, and it’s not hard to see why.  It is difficult to ignore the company’s ratios and stats.  At the same time, as it is among the bottom 28 percent in its industry rank and has a Zacks Rank #3, it can be difficult to feel inspired by the company’s stock as a whole.  This is particularly true following two consecutive years in which the industry has seen broader market underperformance. Therefore, before diving in, cautious value investors may hold off for additional analyst sentiment, estimates, and broader factors for Barclays.  Once those occur, the company’s stock may prove to be an exciting choice after all.