Does the Lloyds Banking Group PLC share price offer value investing potential?

Could Lloyds Banking Group PLC’s (LON:LLOY) (LLOY.L) share price deliver impressive growth?




Lloyds Banking Group PLC
Lloyds Banking Group PLC

With a P/E ratio of around 7.5, I think that the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price could offer good value for money at the moment. Alongside this, it has a 6% dividend yield and trades only slightly above its tangible book value.

Of course, investors are relatively cautious about its investment prospects. That’s understandable, since the IMF recently downgraded the UK’s economic outlook. I wouldn’t be surprised if there is a further downgrade, since investors, businesses and consumers seem to be becoming increasingly nervous about Brexit.

While it represents a significant change from a political and economic perspective, I believe that the biggest risk is fear of the unknown. In my view, there will inevitably be some disruption, but in the long run it could prove to be a positive or negative event economically. At the moment, there is no way of knowing the full effects of Brexit, and so discounts seem to be increasingly applied to UK-focused shares.

One such company is Lloyds, which is possibly the most UK-focused FTSE 100 banking stock. Although this means it has less diversity than its peers, I believe that it has a more efficient business model and even a stronger balance sheet than some of its industry peers. And with a size and scale advantage over challenger banks, it could have greater investment capabilities in areas such as digital opportunities. This could help to boost its performance at a time when consumers are increasingly demanding new ways to manage their money.

Therefore, I feel that while cheap, the Lloyds share price may experience further weakness in the short run. In future years, though, its low P/E ratio, high yield and price to tangible book ratio suggest to me that it could offer good value for money. That’s particularly the case since I feel it has a solid strategy that could catalyse its financial performance in future years.




About Robert Stephens 5151 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page