Should Investors Reassess Barclays After Its 46% Surge in 2025?

If you are trying to decide whether Barclays deserves a spot in your portfolio, you are definitely not alone. Investors have watched as the stock put in a strong showing across multiple timeframes, and it is only natural to wonder whether there is still room for the stock to grow. Over the last week, Barclays notched a gain of 3.9%, and while one-week surges can easily be noise, a glance at the longer-term chart is hard to ignore. This year alone, shares are up nearly 46%, and on a five-year view, the stock has delivered a striking 375.4% return. That kind of momentum tends to get attention.

So, what is fueling Barclays’ impressive run? The market has responded to a general shift in how major financial institutions are perceived, with optimism building around renewed stability and improved global outlooks. Despite subtle day-to-day market noise, the company’s sharp upward trajectory suggests investors are seeing greater upside or less risk in the long term. Of course, all this excitement means it is even more important to pause and ask whether, at these levels, Barclays is undervalued or has already run too far.

When we put Barclays through our valuation framework, it scored a 4 out of 6 for undervaluation, which is solid but not quite the perfect score. In the next section, we will break down each valuation approach to see what is driving that rating. And if you are hoping for a shortcut to a deeper understanding of what valuation really means for Barclays, stay tuned as there may be a smarter way to view this altogether.

Barclays delivered 76.5% 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 valuation model takes a close look at how much profit a company earns above the cost of equity. This is a measure of how efficiently Barclays reinvests shareholders' capital over time. Rather than projecting cash flows, this approach focuses on the bank’s ability to generate returns in excess of its required cost of capital. This ultimately captures the true value delivered to shareholders.

According to this method, Barclays’ Book Value stands at £4.41 per share, with analysts forecasting a stable EPS of £0.57 per share going forward, based on a weighted average of future return on equity estimates from 11 analysts. The model calculates a Cost of Equity of £0.45 per share and finds that Barclays is producing an Excess Return of £0.11 per share. The average Return on Equity is a strong 10.58%, and the stable Book Value is projected to reach £5.35 per share according to 7 analyst forecasts.

With these inputs, the Excess Returns model arrives at an intrinsic value for Barclays that is 46.9% above its current market price. This figure implies that the stock is significantly undervalued compared to its underlying economic performance and growth potential.

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 46.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Barclays Price vs Earnings

The Price-to-Earnings (PE) ratio is widely regarded as the preferred multiple for valuing well-established, profitable companies like Barclays. This metric helps investors determine how much they are paying for each pound of company earnings, making it a practical tool for assessing whether a stock is attractively priced relative to its profit generation.

Valuing a business by PE is not done in isolation. Growth expectations and risks play a crucial role in shaping what is considered a “normal” or “fair” PE ratio for any given company. Faster growth or lower risk can justify a higher PE, while slower growth, increased competition, or unique risks often mean a lower multiple is more appropriate.

Currently, Barclays trades at 9.0x earnings, making it cheaper than the UK Banks industry average of 10.4x and the peer group average of 11.0x, suggesting potential value at first glance. However, looking deeper, Simply Wall St’s proprietary “Fair Ratio” calculation takes into account a broader set of factors such as earnings growth, profit margins, risk profile, industry dynamics, and size, rather than just comparing Barclays to similar banks. This Fair Ratio for Barclays is 8.4x, which is slightly lower than the current market multiple.

This means that while Barclays is cheaper than its peers and industry, its current earnings multiple is actually a touch higher than what fundamentals alone would suggest. The difference, however, is small enough that the stock appears fairly valued on this metric.

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 simply the story or perspective you have about a company’s future, connecting your views on revenue growth, earnings, margins, and risks in a way that helps you estimate a fair value grounded in real business drivers, not just ratios or historical data.

Narratives take the complexity out of analysis by linking a company’s story to a specific financial forecast and fair value. This allows you to see exactly how your expectations compare to reality. They are easy to create and follow on Simply Wall St’s Community page, where millions of investors worldwide discover, share, and debate Narratives that are updated dynamically as the latest news, results, or market changes come in.

With Narratives, you are empowered to make buy or sell decisions based on how your Fair Value stacks up against the current Price, adjusting as your view evolves with new information. For instance, one investor might set a bullish Narrative if they believe Barclays’ digital banking investments and margin expansion will push fair value toward £4.55 per share. A more cautious investor could see regulatory risks leading to a lower fair value estimate of £3.06.

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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