Although Barclays‘ (LSE:BARC) shares have risen 126% since October 2021, they’re still (8 October) changing hands for a fifth less than they were in July. Could this be an excellent buying opportunity to consider, or a sign of a permanent loss of investor confidence?
Let’s look at the latest forecasts.
What do the ‘experts’ think?
Based on the estimates of the 19 brokers covering the stock, Barclays’ shares are around 28% undervalued. In fact, only one of them is advising their clients to Sell:
- Strong Buy: 2.
- Buy: 11.
- Hold: 5.
- Sell: 1.
- Strong Sell: 0.
Of course, these are only opinions but they are produced by individuals who are paid to crunch numbers all day. If they’re right, it means a £10,000 investment (2,259 shares) could grow to £12,800 over the next 12 months.
What about the dividend? Anyone buying the bank’s shares today would have missed out on this year’s interim payment of 5.9p. For the full year, analysts are predicting a total payment of 15.2p a share. Let’s stick with this number for now. It means 2,259 shares could earn £343 in dividends over the next year. No guarantees, of course.
Add this to the anticipated growth in the bank’s share price and the overall return would be a very impressive 31.4%.
What could go wrong?
However, there are risks. And these could explain some of the recent pullback in Barclays’ share price. For example, there’s increased speculation that a one-off windfall tax – or something more permanent — might be imposed on the sector in this month’s Autumn Budget.
Also, banks’ earnings are notoriously cyclical. Generally speaking, their performance reflects wider macroeconomic conditions. Barclays is no exception. In particular, it’s heavily exposed to a shaky UK economy. Although it’s a little early to get alarmed, the bank did report a £196m increase in its loan impairment charge during the first six months of 2026 compared to the same period a year earlier.
A bit of a bargain?
Even so, there’s plenty of evidence to suggest that the bank’s shares are undervalued. Barclays has the lowest price-to-earnings (P/E) ratio of the FTSE 100’s five banks. Its price-to-book ratio of 0.8 is also the lowest. According to McKinsey & Company’s annual review of the industry, the global average is 1.2. If the bank could match this figure, its share price would be 50% higher.
Some consider the bank’s reliance on its trading division – which contributed around half of all earnings in 2025 – as its Achilles’ heel. But this could be a strength if we enter a period of global stock market instability.
As billionaire investor Warren Buffett famously said: “Be fearful when others are greedy, and greedy when others are fearful.”
Personally, I think Barclays’ shares are a bargain. For 2028, analysts are predicting earnings per share of 75.6p, implying a forward P/E ratio of just 5.9. The dividend’s forecast to be 22.5p. If this proves to be correct, the stock’s currently offering a forward yield of 5.1%, comfortably above the Footsie average.
I already own Barclays’ shares and I’m comfortable with my decision to buy. Indeed, I think the stock’s worth considering by others looking for exposure to the banking sector. What’s more, there are other brilliant UK shares that I’d consider buying right now…
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James Beard owns shares in Barclays plc.
This story originally appeared on Motley Fool
