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The FTSE 100 has been on a powerful run of late, but some particular person shares nonetheless look able to a lot bigger strikes. Particularly, there are two big-name Footsie shares that, for my part, have the potential to surge this yr. However will they?
Chief within the defence sector
BAE Methods (LSE: BA.) has already loved an enormous re-rating as defence spending has risen throughout Europe and NATO.
The shares are up 8.4% in 2026 and sitting at 1,901p as I write on 12 February, giving a market cap of £57bn. That suggests a trailing price-to-earnings (P/E) ratio of about 29 and a dividend yield round 1.8%. The worth has climbed strongly in recent times as governments step up long-term defence commitments.
A 50% achieve from right here would want robust earnings development and for the market to maintain paying a premium for ‘security’ property. With query marks over international development and rising defence budgets, that doesn’t appear inconceivable.
BAE already has a report order e book and multi-year programmes in areas comparable to fight plane and naval techniques, which might help additional revenue development if budgets preserve rising.
If income develop sooner than anticipated and the valuation stretches a bit of additional, the mixture of earnings development, dividends and a better P/E a number of might, in principle, ship very robust returns.
Is Barclays undervalued?
Barclays (LSE: BARC) is a really totally different FTSE 100 story. The shares have rebounded sharply from the banking jitters of current years and are buying and selling at 479p on the time of writing, up 56% within the final 12 months.
Even after that restoration, Barclays nonetheless appears modestly valued with a trailing P/E ratio of 11.3, a price-to-book (P/B) ratio close to 0.9 and a dividend yield round 1.8%. That P/B ratio is notably cheaper than friends comparable to HSBC, NatWest and Lloyds.
The case for a possible 50% achieve rests on three pillars. One is administration delivering stronger returns on fairness, helped by price cuts and reshaping the funding financial institution.
Traders would additionally have to be keen to pay a better a number of if profitability improves and rates of interest ease gently. Then there’s the continuing share buybacks that might scale back the share rely and raise earnings per share.
Nonetheless, banks stay delicate to the well being of the financial system, regulation and credit score losses. A weaker UK backdrop, rising unhealthy money owed or contemporary regulatory points might all cap the share worth. There’s additionally the danger that the financial institution’s technique doesn’t repay and a decrease relative worth displays larger threat.
Key takeaways
Each BAE Methods and Barclays are well-known Footsie firms which have loved robust current development. With that stated, I feel the chance of additional 50% will increase is low because it at present stands.
Whereas I feel they’re each good operators of their sectors, I feel buyers ought to contemplate watching and ready till valuations come down additional.
