Since October 2021, Barclays‘ (LSE:BARC) shares have soared nearly 144%. Yet, based on both earnings and its balance sheet, the stock’s currently (1 October) the cheapest of the FTSE 100’s five banks.

Why is this? Is it a warning sign, or a brilliant opportunity to consider? Let’s see.

Crunching the numbers

Figures from the London Stock Exchange Group show that Barclays has a historic price-to-earnings (P/E) ratio of 8.7 and a price-to-book (PTB) ratio of 0.8.

Looking at its profit, if the bank was valued the same as the average of its Footsie peers – in other words, using a P/E ratio of 11.9 – its shares would change hands for 37% more.

The disparity’s even greater when assets and liabilities are considered. HSBC, Natwest Group, Lloyds Banking Group, and Standard Chartered have an average PTB of 1.43. Apply this to Barclays’ current stock market valuation, and its shares appear 79% undervalued.

However, there’s a reason for this. As the table below shows, half of Barclays’ 2025 pre-tax earnings came from its investment arm.

This division advises on mergers, acquisitions, and corporate restructuring. It also helps companies raise finance. In addition, it actively trades in global markets. But as anyone who invests in the stock market knows, returns can be volatile and unpredictable.

As a result, investors appear to place a lower premium on Barclays earnings. Other banks attract a higher multiple as they derive a greater proportion of their income from traditional retail banking, including the provision of bank accounts, mortgages and other loans. Here, profits are usually more stable.

An unsung hero?

But taking into account Barclays’ earnings profile, I still believe the bank’s underappreciated. As the table above shows, its pre-tax profit has soared by 30% over the past three years. Also, it’s made good progress in reducing its head office costs.

When unveiling its 2026 half-year results, the bank said it remained on course to deliver 5% annual earnings growth over the next three years and that it was targeting a return on tangible equity of 14% in 2028.

However, there are risks. Specifically, a windfall tax could be imposed on the sector at this month’s budget. Moreover, a downturn in the UK economy could affect a significant proportion of its business. In particular, a worsening economic backdrop could lead to rising loan defaults.

Also, critics have pointed out that although the bank’s investment arm continues to do well, it’s under-performed when judged against some of its Wall Street rivals.

My view

Personally, I believe the bank has lots going for it. Undoubtedly, its shares are cheap but I don’t think they’re quite in bargain territory. We’ve seen that there’s a structural reason why the stock isn’t valued as highly as its peers.

However, the group’s earnings are going in the right direction and it plans to pay a £2bn dividend for 2026. On 28 July, a £1bn share buyback programme was also announced, double that of the previous quarter.

Accordingly, I have some of its shares in my portfolio. Indeed, I think others could consider the stock. In my opinion, Barclays is an impressive business with a strong record, but it’s not the only exciting growth opportunity I’ve spotted…

What growth stock do we like better than Barclays Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential growth.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at a growth share idea we think is worth your time.

James Beard owns shares in Barclays plc.