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Santander Consumer Unveils Share Buyback Plan: Worth a Look?

Zacks Equity Research

Santander Consumer USA Holdings Inc. SC continues to reward its shareholders through dividend hikes or additional share repurchases. The company’s board of directors recently announced the share-buyback plan with authorization to repurchase shares worth $400 million. This is part of an amended 2018 capital plan, approved by the Federal Reserve.

Such repurchases may be made in the open market, in privately negotiated transactions, or otherwise. The repurchase authorization does not obligate the company to repurchase any dollar amount or number of securities and may be suspended or discontinued any time.

The repurchase of shares might occur through the end of the second quarter of 2019. The existing program is additional to the company’s previously-announced share-repurchase program worth $200 million, completed this January. 

Notably, Santander Consumer has also been paying quarterly dividends, along with regular hikes. Since October 2017, the company has raised its dividend twice. The dividend was last hiked in July 2018 by 300% to 20 cents from 5 cents per share.

Santander Consumer has rallied 28.4% year to date compared with the industry’s growth of 25.8%. Currently, the stock carries a Zacks Rank #3 (Hold).

With strong liquidity and balance-sheet position, we believe Santander Consumer will continue to reward its shareholders, moving ahead. So, keeping this in mind, is the company worth considering? Let’s dig deeper into its financials and fundamental strengths.

Value Score: Santander Consumer currently has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.

Earnings Strength: Santander Consumer has an expected earnings growth rate of 7%, over the coming three to five years. With its earnings momentum, the earnings growth rate is anticipated to be around 3.2% for the current year and 5.9% for 2020. Furthermore, the company recorded an average positive earnings surprise of 3.86%, over the trailing four quarters.

Revenue Growth: Organic growth is a key driver for Santander Consumer, with its sales witnessing a compound annual growth rate of 5.9% over the five-year period (2014-2018), with some annual volatility. The company’s projected sales growth (F1/F0) of 12.9% (against 4.72% industry average) indicates continued improvement in revenues.

Strong Leverage: Santander Consumer’s debt/equity ratio is 0.00 compared with the industry average of 0.88, displaying no debt burden. It highlights the financial stability of the company even in an unstable economic environment.

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Franklin Resources, Inc. BEN has been witnessing upward estimate revisions, for the past 60 days. Also, the company’s shares have gained nearly 12.2% year to date. At present, it sports a Zacks Rank of 1.

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