Barclays’ (LSE: BARC) share price is down 4% from its 24 October 12-month traded excessive of £2.51.

I believe a lot of this is because of profit-taking, because the inventory is up 79% from its 8 November one-year low of £1.34.

Regardless, the price fall might be a chance to think about shopping for the inventory cheaply for these whose portfolios it fits.  

Spectacular third-quarter outcomes

This appears to be like notably the case given the robust Q3 2024 outcomes launched on 30 September.

Earnings elevated 5% 12 months on 12 months to £6.5bn. And pre-tax revenue jumped 15.8% to £2.2bn on continued environment friendly financial savings and cost-cutting – forward of analysts’ forecasts of £1.97bn.

Return on tangible fairness (ROTE) rose from 11% to 12.3% over the identical interval. This is identical as return on fairness besides that it excludes intangible parts similar to goodwill.

What are the expansion targets from right here?

These numbers align with the financial institution’s targets in 2024 and thru to 2026. Particularly, it goals for a ROTE of 10%+ this 12 months, and of 12%+ by end-2026.

For earnings, it’s on the lookout for £11bn+ this 12 months and round £30bn by end-2026.

The principle danger to those numbers is a declining internet curiosity margin, for my part. That is the distinction between curiosity acquired on loans and paid out on deposits.

Nevertheless, analysts forecast that Barclays’ earnings will develop 11.7% a 12 months to the tip of 2026. And it’s in the end earnings development that drives a agency’s share price (and dividends) increased over time.

Certainly, Barclays intends to pay £10bn+ to shareholders from 2024 to 2026, via dividends and share buybacks.

The Q3 outcomes already noticed it improve the interim dividend 7%, from 2.7p to 2.9p. If this hike have been utilized to all the 8p payout final 12 months the return can be 8.56p. On the present share price of £2.38, this is able to yield 3.6%.

Are the shares undervalued?

I must resolve whether or not the inventory is undervalued. My place to begin in ascertaining that is to take a look at key inventory valuation measures I exploit, starting with the price-to-book ratio.

On this, the financial institution at present trades at 0.5 in opposition to a mean of 0.7 for its competitor group. This includes Commonplace Chartered at 0.6, Lloyds at 0.7, NatWest at 0.8, and HSBC at 0.9. So, Barclays appears to be like low-cost on this foundation.

The identical is true on the price-to-sales ratio too. Barclays is on the backside of its peer group right here as properly, on 1.5 in opposition to a mean of two.1.

To work out how undervalued it’s in money phrases, I ran a reduced money circulate analysis utilizing different analysts’ figures and my very own. This exhibits the inventory to be 30% undervalued at its present price of £2.40.

Due to this fact, a good worth for the shares is £3.43, though they might go decrease or increased than that.

Will I purchase it?

Aged over 50 now, I’m targeted on shares that yield 7% a 12 months. That is so I can more and more stay off the earnings and proceed to scale back my working commitments. With a gift return of three.4%, Barclays doesn’t match the invoice proper now.

If I have been youthful although, I’d most likely add it to my portfolio for its earnings development prospects. These ought to energy each the share price and dividends increased over time.