Is Barclays Supported by These Factors?

With shares of Barclays (NYSE:BCS) trading around $18, is BCS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Barclays is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The company operates in eight segments: U.K. Retail and Business Banking, Europe Retail and Business Banking, Africa Retail and Business Banking, Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations. Banking and capital markets services are just about a requirement for most consumers and companies around the world.

Barclays is being fined $487.9 million by the Federal Energy Regulatory Commission for allegedly manipulating energy prices and fixing indexes to benefit swap positions with some of its traders. The company is fighting the allegations, which will likely lead to a drawn-out court battle. FERC regulators believe the bank and its traders knew their activities were illegal, calling it a “manipulative scheme.” Look for Barclays to continue to provide valuable financial services and see rising profits coming from expanding economies.

T = Technicals on the Stock Chart are Mixed

Barclays stock witnessed a strong run over the last year. The stock is now trading sideways, after it digests gains from the recent rise in stock price. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Barclays is trading between its key averages, which signal neutral price action in the near-term.

BCS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Barclays options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Barclays Options

30.33%

13%

10%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Average

Average

September Options

Average

Average

As of today, there is average demand from call and put buyers or sellers, seen as neutral over the next two months. To summarize, investors are buying a small amount of call and put option contracts, and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates, and what that means for Barclays’s stock.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions can also help gauge investor sentiment on Barclays’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Barclays look like, and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

N/A

-50.10%

N/A

-62.60%

Revenue Growth (Y-O-Y)

N/A

N/A

N/A

N/A

Earnings Reaction

-1.31%

9.13%

-0.74%

8.98%

Barclays has seen decreasing earnings over the last four quarters. From these numbers, it seems the markets have had mixed feelings about Barclays’ recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Barclays stock done relative to its peers, Deutsche Bank (NYSE:DB), HSBC (NYSE:HBC), UBS (NYSE:UBS), and the overall sector?

Barclays

Deutsche Bank

HSBC

UBS

Sector

Year-to-Date Return

8.49%

-0.20%

4.99%

14.93%

6.71%

Barclays has been a relative performance leader, year-to-date.

Conclusion

Barclays provides valuable financial services to companies and consumer across the globe. The company is currently subject to allegations of securities manipulation, and the stock is now trading sideways after a period of rising stock prices. Over the last four quarters, earnings have been decreasing, which has produced mixed feelings among investors in the company. Relative to its peers and sector, Barclays has been a year-to-date performance leader. WAIT AND SEE what Barclays does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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