Since the 2008 financial crisis, the global banking industry has been grappling with several regulatory issues and legal problems. These, along with the ultra low interest rate environment, had played havoc with financials of the banking stocks and lowered the attractiveness of the industry for investors.
However, with the Federal Reserve increasing its rates and the global economy on a rebound, we do not think it is worthwhile to totally overlook the sector. Therefore, we have picked one such stock – Barclays PLC BCS – for you to add to your portfolio.
With over £1.24 trillion ($1.88 trillion) in assets as of Sep 30, 2015, this major foreign bank operates through an international network in over 50 countries and regions in Europe, the U.S., Africa and Asia.
Why is Barclays a Good Pick?
Earnings Growth: Though Barclays has not witnessed historical (3–5 years) growth in earnings per share (EPS), we believe the company is presently well positioned to reverse the trend.
The earnings momentum is expected to continue in the near term as indicated by Barclays’ projected EPS growth (F1/F0) of 32.08%, compared with the industry average of 2.56%. Also, the company’s estimated long-term EPS growth rate of 15.98% promises rewards for investors.
Stable Expense Level: Initiatives undertaken by Barclays to overcome adverse macroeconomic conditions and enhance profitability have started bearing fruits. The company has been recording a decline in expenses for the last several quarters. Also, the company’s proactive attitude toward resolving legal matters is working in its favor.
Favorable Zacks Rank: Barclays currently carries a Zacks Rank #2 (Buy), driven by stability in the Zacks Consensus Estimate over the last 30 days for 2015 and 2016.
Valuation Looks Reasonable: Barclays has a Value Style Score of ‘B’. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’, when combined with Zacks Rank of #1 (Strong Buy) or #2, offer the best upside potential.
Other Stocks to Consider
Other foreign banks worth considering include Grupo Financiero Galicia S.A. GGAL, Mizuho Financial Group, Inc. MFG and National Australia Bank Limited NABZY. All these stocks sport the same Zacks Rank as Barclays.
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