Shares in Barclays (LSE: BARC) (NYSE: BCS.US) have taken a bit of punishment over the past year, with a fall of 8.5% to 231p failing to even match a FTSE 100 drop of half a percent over the same period.
Some of that bearishness is down to the seemingly unending stream of fines levied on the banking industry for all manner of misdemeanours over the past few years, and lastweeks penalty of $4.3bn on six large banks for rigging foreign exchange markets is but the latest installment.
But is the sectors pariah status keeping share prices down below a reasonable fundamental valuation? I think it is.
Just look at the current consensus forecast for Barclays, for example. Theres a rise in earnings per share of 23% currently predicted for the year ending December 2014, followed by a further 28% for 2015 to 26.3p per share thats an overall increase of 57% over 2013s figure of 16.7p, and thats a nice growth story by any standards.
It should feed through to dividends, too, with a modest 1.8% rise to 6.6p per share forecast for this year, but thats under a regulatory regime that frowns upon paying out too much cash when there are liquidity ratios that could do with beefing up.
If the soothsayers are to be believed, 2015 should see a more substantial rise of 45% to take the dividend to 9.6p per share. Based on the current share price that would provide a yield of 4.1%, and it would be 2.7 times covered by forecast earnings.
That all sounds jolly, but is it going to happen?
Third-quarter figures revealed at the end of September showed a 5% rise in adjusted pre-tax profit over nine months to4,939m, with operating expenses still on the way down. Those liquidity ratios were looking healthy and heading in the right direction as well, and net tangible asset value per share was up 8p to 287p in the quarter.
How does that leave the shares looking on fundamental valuation? Were looking at a P/E of 11 for December 2014, falling to under 9 for a year later. And for growth investors, that represents a PEG ratio of only 0.5 this year and 0.3 next those who follow such things generally look for 0.7 or less.
All in all, that leaves Barclays shares looking good value to me.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.