Barclays (LSE: BARC) (NYSE: BCS.US) shares have slumped by 15% over the past 12 months, to 236p, so you might expect there’s a poor forecast behind it.
But no, quite the contrary — the analysts’Â consensus suggests a rise in earnings per share (EPS) of 64% for the year ending December 2014, to 27p. And there’s a 24% rise penciled in for 2015 too.
That is based on underlying earnings per share, after Barclays reported an adjusted figure of 16.7p per share for the year to December 2013, which was down 53% on 2012’s adjusted EPS result of 35.5p. On statutory figures, Barclays revealed earnings of just 3.8p per share, but that was a big improvement on the 4.8p statutory loss per share from 2012.
How’s it moving?
As we get closer to the date, forecasts will of course become more refined, and the trend over the past year is actually a little disappointing. A year ago there was a consensus of more than 40p per share suggested for 2014, although that really was back in the early “finger in the air” days. Since then the prediction has been slowly but steadily adjusted downwards — 31p six months ago, 29p a month ago, before dropping to the current 27p.
Now, I’m certainly not advocating putting too much faith in the predictions of analysts, as they are often spectacularly wrong — but their opinions are definitely one of the inputs we should use to help make our investment decisions. And the level of trust we place should depend, at least in part, on how many individual recommendations we have and how widely spread are their figures.
For Barclays forecasts, things are looking quite tight, with a range of individual forecasts from around 22.5p per share up to the 30p mark. Although the highest estimate is still a third larger than the lowest, we often see individual forecasts that are way further apart than that for some companies.
Analysts bullish
Actual buy and sell recommendations can be a little tricky to understand, with City types using all sorts of weird jargon in place of plain English, but looking at 29 analysts currently forecasting, it pretty much boils down to 20 of them urging us to buy Barclays shares and just one suggesting we should sell — the rest are neutral.
Overall, then, the professional commentators are very bullish on Barclays, but the share price performance suggests actual investors are less keen. So does this mismatch mean we’re looking at a bargain here?
I think we are.
Looking cheap
We have a forward P/E of under nine for December 2014, falling as low as seven based on 2015 forecasts. And we have well-covered dividends set to yield 4% this year and close to 5.5% next. Sure, the risk of investing in banks has not disappeared, but it’s receding rapidly. Barclays was one of the strongest before the crash, and it looks to be regaining that status today with its rapidly strengthening liquidity position.
That’s why I recently added Barclays to the Fool’s Beginners’ Portfolio.