By Lloyds Banking Group PLC (LLOY) is the share price undervalued in 2022?
Lloyds has a long history, and this penny stock used to trade at 64 pence before the pandemic.
Back in 2018, you could buy Lloyds shares for 70p and above
Lloyds is currently trading at 0.44 pence showing its decline in price since then.
We see about a 30% decline in earnings in this financial year.
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Even though Lloyds is not earning as it used to, analysts still identify Lloyds as undervalued.
Lloyds made £5.8bn net profit in 2021 thanks to the high mortgage demand. There is a £1.3bn increase compared to 2020 profit.
Lloyds may benefit from increased interest rates by The Bank of England, as their revenue will grow as they will be charging more for their lending services.
On the other hand, people will not be borrowing as much money
According to Interim Management Statement in Q1, Lloyds indicated an income growth of £4.1bn in the past three months.
The firm announced a new strategy alongside a new business structure that will help them further improve its position in the market.
However, rising inflation reduces the number of loans.
Record high inflation makes it difficult for borrowers to repay their payments.
The war in Ukraine did not directly impact the firm, but borrowers suffered from increased energy and commodities prices.
Given the current circumstances, we can expect Lloyds to suffer this year due to the current economic situation.
Lloyds is exposed to the negative impact of Brexit, the pandemic, the war in Ukraine and inflation.
These are factors that will negatively affect a company’s income.
The Lloyds share has been declining for over half a decade now
In the past five years ago, the price has reduced by 40%, and they are nearly 8% down in 2022.
This data suggests that buying Lloyds shares is a risky business, but many investors would argue that the LLOY share price is just too cheap to not buy.
The most attractive factor of this penny stock is its price-to-earnings ratio of 6.62.
The current annual dividend yield is 4.56% which is high.
The bargain hunting investors should most certainly consider Lloyds to add to their portfolio and see what a future brings.
As one of the major British banks, I also believe that Lloyds will survive and bring back its past glory.
Considering its long-term potential, we can see why analysts believe Lloyds shares will grow in value.
Do not expect short-term income, but buy buying into this penny stock for long-term growth might be a wise investment decision.
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