Barclays’ (LSE: BARC) share price has risen 77% from its 30 October 12-month low of £1.28. Nonetheless, this doesn’t imply there isn’t a worth left in inventory.

It could possibly be that the market has simply been catching up with the true price of the shares. And it could be that the inventory’s price nonetheless doesn’t mirror its truthful worth.

How a lot room for additional features?

On the important thing price-to-book (P/B) ratio measure of inventory valuation, Barclays trades at 0.5. That is low-cost in comparison with the common 0.7 P/B of its rivals.

This group includes Commonplace Chartered (additionally at 0.5), NatWest at 0.7, and each HSBC and Lloyds at 0.8.  

The identical relative undervaluation for Barclays can be seen in its price-to-sales ratio of 1.4. This compares to a peer group common of two.

To establish how a lot scope there’s for additional share price features I used a discounted money movement analysis. This reveals the inventory to be 26% undervalued at its current price of £2.26.  

Due to this fact, a good worth for the shares can be £3.05. They could go decrease or increased than that, nevertheless it underlines how a lot worth is left in them.

The financial institution’s new imaginative and prescient

Barclays’ price rise since October was primarily pushed by its new technique to be a ‘Simpler, Better and More balanced’ enterprise, for my part.

This entails promoting off non-priority companies (together with its German shopper finance operation) and constructing up its Company and Funding Banking franchise.

It introduced the sale of this German enterprise on 4 July. And it was reported on 10 July that it plans to quadruple its non-public banking property in Asia by end-2028.

This imaginative and prescient is aimed toward reaching a return on tangible fairness (RoTE) of 10%+ this yr, and 12%+ in 2026. It additionally contains dispersing £10bn+ to shareholders over 2024-26 by means of dividends and share buybacks. Each these rewards are typically supportive of share price rises over the long run.

In its full-year 2023 outcomes, it achieved a RoTE of 10.6% and whole share buybacks of £1.75bn. It additionally raised its annual dividend from 7.25p to 8p and introduced a brand new share buyback of up to £1bn.

Analysts’ estimates are that Barclays’ earnings will develop by 11.9% annually to end-2026. Earnings per share are forecast to rise by 16.4% a yr to that time.

Time for me to purchase the shares?

To date, so good, it appears to me, on the implementation of Barclays’ new imaginative and prescient. Nonetheless, there are dangers within the shares, as in all shares.

A significant slip-up in any of the a number of transferring elements in its reorganisation may show very expensive. Moreover, its ongoing UK retail banking enterprise faces declining margins as rates of interest fall together with inflation.

That stated, neither of those elements bothers me sufficient to not purchase the shares.

Each the Indian and Singaporean economies (the main focus of Barclays’ Asia enlargement) proceed to develop strongly. And inflation and rates of interest are cyclical – they may little question rise after which fall many instances from right here.

If I didn’t already personal shares in two banks (HSBC and NatWest), I’d purchase Barclays’ inventory at this time. There seems lots of worth left in it, and I really feel additional features are doubtless primarily based on the financial institution’s sturdy progress prospects.