Lloyds (LSE: LLOY)shares have got off to a slow start in 2024. Continued uncertainty surrounding the future macroeconomic environment alongside a potential car financing commission scandal has pushed the stock down.
Long-term shareholders will be hoping this year will see the stock reverse its fortunes. After all, the Black Horse Bank has posted a subpar performance in recent years.
But at just shy of 42p, what do I think about Lloyds? Well, I’m confident that I could pick up one of the best bargains on the market.
A disappointing start
A weak performance has become almost normal in recent years. Five years ago, a share in the firm would have cost 52.8p. Today, it’s 20.9% lower.
This year alone has seen it lose over 13.2% of its value as the business faces a potential fine of up to £1bn following an investigation from the Financial Conduct Authority into its involvement in practices surrounding motor loan commissions. In the last five years, Lloyds has been a lacklustre investment.
Forgetting the past
But what lies ahead? That’s what I’m more focused on. And after a poor spell, wouldn’t now be the best time to buy some shares? I’m hoping for an uptick in share price. I’m confident that there’s potential for it to happen in the years to come.
A declining share price isn’t the best news. But it does mean Lloyds stock now looks cheap as chips. Its price-to-earnings ratio, which considers its profitability relative to its market cap, is 5.5. That’s below the current figure for the FTSE 100 of around 11. Additionally, its price-to-book ratio, which compares its market valuation with its net asset value, is 0.5. That shows the stock may be undervalued by half.
Passive income
Added to that is the potential to make some extra cash on the side. Analysts forecast a dividend for the year of 2.7p, which at its opening price as of 6 February equates to a yield of around 6.5%. Going forward, it’s predicted its dividend will rise to 3.71p by 2026. Of course, it’s worth noting that dividends are never guaranteed.
Long-term outlook
I’m bullish on Lloyds, but I know we shareholders may continue to endure volatility in the months ahead. Rising interest rates have provided its net interest margin with a boost. But the effects of this seem to be wearing off. As long as rates remain high, there’s also the threat of borrowers defaulting on payments.
Lloyds’ performance is also heavily tied to the UK economy, given it generates all its revenues domestically. Should we continue to see the UK struggle, Lloyds may continue to suffer.
The plan
However, I think the business is well-positioned to excel in the coming years as interest rates drop and the UK economy strengthens and grows.
I see value in domestic shares right now. What the UK has to offer seems to have fallen out of favour with investors. But I’m using that as an opportunity to snap up some bargains. If I had the spare cash, I’d buy more Lloyds shares today.
The post Lloyds shares: the best bargain out there right now? appeared first on The Motley Fool UK.
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More reading
Selling at just 4.5 times earnings, is the Lloyds share price really good value?
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Why passive income matters to Lloyds Bank shareholders
Should I invest in Lloyds as the FTSE 100 rebounds?
If I’d invested £4,000 in Lloyd shares one month ago here’s what I’d have now
Charlie Keough has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
