Financial Analysis and Valuation Models

Running head: FINANCIAL ANALYSIS AND VALUATION MODELS
Financial Analysis and Valuation Models
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Executive Summary:
This report is prepared to show the effect of different valuation models on the investment
decision of the investor. In this report, financial performance of the Barclays Plc. has been
analyzed in such a way that investment decision can be made considered for different factors
affecting investment. This report covers the ratio analysis for four previous financial year of
the Barclays Plc., from the information obtained from the financial statement of the company.
This report also indicates the choice of the strategy an investor can made from Buy, Hold and
Sell strategy based on three valuation models and financial performance of the company.

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Table of Contents
1. Introduction:...........................................................................................................................3
2. Stock Evaluation Method:......................................................................................................3
2.1 Dividend Discount Model:...............................................................................................3
2.2 Discounted Cash Flow:....................................................................................................4
2.3 Price to Earnings ratio:.....................................................................................................5
3. Valuation of Share Using Different Models of Valuation:....................................................7
3.1 Valuation Based on Dividend Discount Method (DDM):...............................................7
3.2 Valuation Based on Cash Flow Method:.........................................................................8
3.3 Valuation Based on P/E Ratio:.........................................................................................9
4. Past performance Analysis:....................................................................................................9
4.1 Using Price And Market Capitalization of The Company:..............................................9
4.2 Using Financial Ratios:..................................................................................................12
4.3 Using Comparative Statement of Balance sheet and Income Statement:......................14
5. Conclusion:..........................................................................................................................15
6. References:...........................................................................................................................17

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1. Introduction:
Barclays is a multinational banking company engaged in investing as well as financial
services in London. It provides various financial services in different European countries. it
provides personal as well as business banking services in which facilities like credit and debit
cards, investment planning, locker services, wealth management are offered to the different
types of clients based on their net worth. It was established by john freame as Goldsmith
Bankers but in the end of 1736, it become Barclays bank when the son-in-law of James
Freame has taken over the business of Goldsmith. Through acquisitions and mergers with
different banking companies like the Colonial Bank, National Bank of South Africa and the
Anglo-Egyptian Bank and Non-Banking companies like Mercantile Credit Company,
American Credit Corporation etc , it expended its business to different regions of the world.
2. Stock Evaluation Method:
2.1 Dividend Discount Model:
Dividend Discount Model is a process of valuation of stock price of accompany where the
dividend payment is discounted to the present value of stock price. The stocks are valued on
the basis of net present value for the dividends of the future. Gordon’s growth model is a
renowned growth used in this model. If the DDM of a particular stock is higher then it can be
said that the current value of the stock is undervalued and in case DDM of a particular stock
is lower then it can be said that the value of the stock is overvalued currently (Mohammadian
and Rezaee 2018).
The valuation of the stock can be done in following way:
P = D/ (r – g)