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Barclays’ (LSE: BARC) share price has more than doubled from its 7 April one-year traded low of £2.24. But this does not mean it cannot rise substantially again this year.
This is because a stock’s price and value are not the same thing. Price is whatever the market will pay at any point. But value reflects the strength of the underlying business’s fundamentals.
In Barclays’ case, it is trading at a huge discount to what I see as its true value, supported by a series of robust results. And this is reflected in high earnings growth forecasts over the next three years.
So, how high could Barclays share price go this year?
The bedrock of future gains
I think Barclays’ full-year 2024 results, released on 31 December 2024, marked a turning point for the bank. With UK interest rates projected to fall, it had shifted to a fee-based – rather than interest-based – business model.
Those numbers saw total income rising 6% year on year to £26.788bn, ahead of analysts’ forecasts of £26.3bn. Pre-tax profit jumped 24% to £8.108bn, again beating expectations of £8.07bn.
Income from its fee-based investment-banking operations increased 7% to £11.805bn. And in Q4 alone it surged 28% to £2.607bn. Its fee-based private bank and wealth management business income jumped 8% to £1.309bn. And Q4 saw a rise on the same period of 12% to £351m.
Barclays also achieved its return on tangible equity (ROTE) target of 10%+, finishing the year at 10.5%. Like return on equity, ROTE divides net income by average shareholders’ equity, but excludes intangible items such as goodwill.
The pattern carried through into the 30 June H1 2025 results. Pre-tax profit rose 24% to £5.2bn, outstripping analysts’ estimates of £4.96bn. Income increased 12% to £14.9bn, while ROTE climbed to 12.3%.
A risk to Barclays is a prolonged economic downturn in its major markets. Banks’ earnings broadly reflect the economic health of the countries in which they operate.
However, analysts forecast that its earnings will increase by a robust 8.1% a year to end-2028. And it is growth here that powers any firm’s stock price higher over the long term.
How undervalued is it?
Let us assume that the analyst forecasts are right — although they are not set in stone — and that earnings climb by an average of 8.1% for the next three years.
Using a discount rate of 8.4%, my discounted cash flow model estimates Barclays’ ‘fair value’ could secretly be close to £8.98 per share. That is almost double where the stock trades today.
And because asset prices typically gravitate towards their fair value in the long run, it suggests a potentially terrific buying opportunity to consider today if those analyst forecasts prove accurate.
There are also clear secondary signals of undervaluation when compared with peers.
Barclays’ 2.5 price‑to‑sales ratio is the lowest in its group — below Standard Chartered (2.8), Lloyds (3.3), NatWest (3.4), and HSBC (4.7).
And its 11.1 price‑to‑earnings ratio also looks cheap against the peer‑group average of 13.9.
My investment view
I would consider buying Barclays if I did not already hold HSBC and NatWest. Adding another banking stock would skew my portfolio’s risk‑reward balance.
But for investors without that issue, Barclays’ strong earnings‑growth outlook and large valuation discount make the stock well worth considering in my view.
