Lloyds Banking Group (LSE:LLOY) just combined fresh third quarter and nine month earnings with a board shake up, as investors digest new profit figures and the arrival of independent directors Nigel Hinshelwood and Chris Rhodes.
Lloyds Banking Group’s latest update lands after a softer patch in the share price, with a 30-day share price return of down 5.79% and a 90-day share price return of down 9.33%, even though the 1-year total shareholder return sits at 21.17% and the 5-year total shareholder return is up more than 2.5x. This points to strong longer term momentum despite recent pressure around earnings and governance changes.
Scan how Lloyds Banking Group compares with other big financial institutions by reviewing our curated set of list of solid balance sheet and fundamentals (10 results) in this sector.
Lloyds Banking Group now trades below both analyst targets and one intrinsic estimate, with a near 50% implied gap at the top end. Where does a fair entry actually sit within that range after the recent pullback?
Most Popular Narrative: 4.2% Undervalued
Lloyds Banking Group closed at £1.03 against a narrative fair value of £1.07, a small discount that still leaves room for debate about how much is already reflected in the current price.
The run of the Black Horse's bank up until the summer, indeed among the better ones among its European peers, has been stellar no doubt. Together with its decent dividends and buybacks, total return for shareholders that bought into the company at the beginning of the year was a healthy 20 per cent at its top back in early August. For investors in the euro area, there even was an additional return of some 2 per cent due to the strength of Sterling, not bad at all for a presumably stodgy, UK-only High Street bank.
See why 6 investors see Lloyds Banking Group as 4% undervalued.
Result: Fair Value of £1.07 (UNDERVALUED)
Still, a tougher UK policy backdrop or a renewed slide in sector P/E ratios could quickly limit how much of the Lloyds Banking Group upside narrative holds.
Find out about the key risks to this Lloyds Banking Group narrative.
Next Steps
Mixed messages on Lloyds Banking Group so far, right? Act while the debate is fresh and weigh both sides by checking the 3 key rewards and 3 important warning signs.
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