If Barclays (LSE: BARC) shares at half the price of others FTSE100 banks? While we cannot compare share prices directly (Barclays’ share price of 389p is arbitrary and can be doubled or halved without any significant change), there are measures such as the price-to-earnings ratio (P/E) or the price-to-book ratio (P/B) that allow us to compare the value of different shares.

For Barclays and other banks, the P/B ratio is sometimes considered the best measure due to the gigantic amounts of assets and debt. Based on this, it can be concluded that Blue Eagle Bank is on sale with a 50% discount. Let me explain.

Half price?

First, what is the P/B ratio? This is a elementary way to compare the share price (P) of a stock with its book value (B). Simply put, book value is a company’s assets minus its debts – something like what would be “left over” if the company went out of business today. The Barclays share price is 389p and the book value per share is 556p, meaning Barclays’ P/B is 0.7.

It’s worth noting that a P/B ratio of 0.7 is itself inexpensive. The only FTSE 100 companies with lower valuations are asset-rich companies such as British soil.

Theoretically, the P/B ratio should never fall below one because the price is lower than the value of the asset. An AP/B of 0.7 suggests that the investor is paying 70p for every pound of book value.

And what’s strange about Barclays shares is how inexpensive they look compared to other banks. Other FTSE 100 banks Lloyds (at P/B of 1.24) i Natwest (with a value of 1.18) are much cheaper. The largest FTSE 100 bank in terms of market capitalization, HSBChas a ratio of 1.4, which suggests that Barclays may be cheaper in comparison.

What’s going on here? What explains this?

Free lunches

There is no such thing as a free lunch. And it must be said that Barclays’ lower valuation comes with its own baggage. In particular, its exposure to private credit, especially in the US, may have spooked investors following the collapse last year of one such lender linked to Barclays.

Where the biggest difference is – a 50% decline compared to HSBC – you have to take into account that bank stocks ebb and flow with the economy. Good economic growth usually means higher wages. This is why a China-focused bank like HSBC commands a higher premium due to its exposure to an economy that is still growing at around 5% annually.

Taking all this into account, the P/B ratio is a signal that Barclays could be a inexpensive buy here. I think this is worth considering for an investor looking for an undervalued stock.