- Summary:
- Barclays share price is trading near its lowest level since the past financial crisis. Fundamental look shows that it is a good buy so long as its above 120
Barclays share price is trading near the lowest level since the past financial crisis. At the current price of 119p, the price is significantly above this year’s low of 75p. Barclay’s is not alone. Indeed, other key banks in the UK, including HSBC and Lloyds share prices have been depressed.
It is easy to see why. Banks in Europe have been under intense pressure in recent years due to low and at times negative interest rates and a sluggish growth of the economy. At the same time, banks have had to navigate large fines and the risks posed by Brexit.
Is Barclays stock a buy?
Let us dig dipper into Barclays and see whether its share price is a buy. For starters, the company operates in two segments: UK and International. In the UK segment, Barclays provides retail banking services to consumers. Indeed, Barclaycard is the most popular credit card in the UK. This is a plus for Barclays because credit cards tend to have better yields than mortgages.
The challenge for the cards is that they have higher delinquencies, especially because of the pandemic. Barclays also controls the third largest retail base in the UK.
In the international side, Barclays focuses mostly on the high-margin investment bank. This makes it a global leader in the debt market. It is also well-known for its trading division, which was responsible for its first quarter growth. What’s better? The trading division did better than the most US banks in Q1 by rising by 70%.
The latter division is probably the reason why Barclays share price tends to outperform Lloyds. That is because, while Lloyds is the biggest UK bank, it does not have an investment arm. And in these volatile times, trading operations are making a killing as Deutsche Bank CEO confirmed.
Barclays valuation
To determine whether Barclays share price is a buy, let us look at key valuation metrics. According to Seeking Alpha, Barclays has a GAAP PE of 10.25, which is slightly lower than Lloyds which has a multiple of about 14x. For banks, a better multiple to look is the price to book ratio.
The firm has a P/B ratio of 0.30 compared to Lloyds 0.47. Looking at growth, Barclays revenue declined by 2% while Lloyds declined by 10.11%. Its forward EPS growth is 68% vs Lloyds decline of 29%. This means that Barclays offers a better value proposition compared to Lloyds.
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Barclays share price technical outlook
The daily chart shows that Barclays stock price has hit resistance at the 38.2% retracement level. It has also struggled to move above the 100-day EMA level at 121.22p. Also, the price is above the 50-day exponential moving averages. It is also along the upward trend shown in red below. Therefore, the short term outlook for Barclays share price is neutral.
A move below the current support of 120p will signal that bears are prevailing. This will see the price continue moving lower. On the other hand, if Barclays share price moves above this week’s high of 126p will signal that bulls are stronger.