Is It Time to Reassess Barclays Shares After a 40% Surge in 2025?

If you have been keeping an eye on Barclays, you are probably wondering what to make of its share price rollercoaster lately. Is this the time to buy, hold, or reconsider? The short-term numbers might look underwhelming, with the stock down 3.3% over the past week and off 2.0% in the last month. But step back and the bigger picture tells a very different story. Year to date, Barclays has rocketed nearly 40%, and over the past five years, shares have soared by over 330%. That kind of growth does not happen by accident, especially considering how market sentiment around banks has shifted in response to global rate changes and industry shakeups.

Such impressive long-term gains often spark debates about whether a stock is rising for good reasons or just riding the wave of speculation. That is exactly where a thorough look at valuation becomes crucial. Barclays currently scores a strong 5 out of 6 on our valuation checks, signaling that, by most measures, it may still be trading at a compelling price. But as you weigh those traditional methods, keep in mind that there is a smarter, more comprehensive approach to understanding value, one that we will explore by the end of this article.

Barclays delivered 62.1% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: Barclays Excess Returns Analysis

The Excess Returns model estimates a company’s value by assessing how much profit it generates above the cost of capital for its shareholders. In simple terms, it asks whether Barclays is consistently making more from its investments than what it costs to fund them. This is an indicator of genuine value creation, not just accounting profits.

For Barclays, several key numbers help paint this picture:

• Book Value: £4.41 per share
• Stable EPS: £0.56 per share
  (Source: Weighted future Return on Equity estimates from 11 analysts.)
• Cost of Equity: £0.45 per share
• Excess Return: £0.11 per share
• Average Return on Equity: 10.54%
• Stable Book Value: £5.31 per share
  (Source: Weighted future Book Value estimates from 6 analysts.)

According to the Excess Returns valuation, the intrinsic value per share stands at £7.32. With Barclays trading at a substantial intrinsic discount of 49.1%, this model signals the stock is notably undervalued against its current share price. This suggests the market may be underestimating the company’s ability to deliver returns above its cost of capital over time.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Barclays.

Our Excess Returns analysis suggests Barclays is undervalued by 49.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Barclays Price vs Earnings

For profitable companies like Barclays, the price-to-earnings (PE) ratio is a widely trusted metric because it links the company’s share price directly to its underlying earnings. This helps investors quickly compare how much they are paying for each pound of profit, making it useful for benchmarking against other banks and the broader sector.

Keep in mind, a “normal” or “fair” PE ratio varies depending on how quickly a company is expected to grow and the risks it faces. Fast-growing companies tend to command higher PE ratios, while riskier or slower-growing firms usually deserve a lower one.

Barclays currently trades on a PE ratio of 8.6x. To put this in perspective, the average listed UK bank trades on a PE of 10.3x. Barclays’ direct peers average 10.9x. By those numbers alone, Barclays appears attractively priced against both its peers and the industry at large.

But instead of just comparing to averages, Simply Wall St offers a “Fair Ratio” that goes deeper. This proprietary figure accounts for Barclays’ future earnings growth, profitability, sector, risk profile, and market cap. It sets a truly tailored benchmark. Barclays’ fair PE ratio is assessed at 8.6x, which is almost identical to its actual PE.

Because the current and “fair” PE ratios are so close, this suggests Barclays shares are neither undervalued nor overvalued right now. Instead, they are trading in line with what you would reasonably expect given its current outlook and fundamentals.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Barclays Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, powerful tool that lets you combine the story you believe about a company — your perspective on where it is heading and why — with the numbers that matter, like fair value estimates and assumptions for future revenue, earnings, and margins.

Instead of just relying on historical averages or analyst targets, Narratives allow you to connect the business story to a clear financial forecast and, ultimately, to a fair value. On Simply Wall St, Narratives are accessible on the Community page, where millions of investors can see, share, and update their views as new information emerges, whether that is company news, regulatory changes, or fresh earnings reports.

This means you can quickly see when your investment thesis is on track, and when fair value compares favourably or unfavourably to the current share price, giving you a dynamic edge in deciding when to buy or sell. For example, some investors think Barclays' moves in digital banking and fintech partnerships could drive its fair value as high as £4.55, while others focusing on execution risk see it closer to just £3.06. Whichever side of the story you believe, Narratives let you put your view into action.

Do you think there's more to the story for Barclays? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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