Should Value Investors Buy Banco Santander (SAN) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Banco Santander (SAN). SAN is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 5.60 right now. For comparison, its industry sports an average P/E of 7.99. Over the past 52 weeks, SAN's Forward P/E has been as high as 7 and as low as 4.44, with a median of 5.45.
Investors should also note that SAN holds a PEG ratio of 0.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SAN's PEG compares to its industry's average PEG of 0.63. Over the last 12 months, SAN's PEG has been as high as 0.36 and as low as 0.28, with a median of 0.32.
Another valuation metric that we should highlight is SAN's P/B ratio of 0.61. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.55. SAN's P/B has been as high as 0.66 and as low as 0.48, with a median of 0.55, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SAN has a P/S ratio of 1.11. This compares to its industry's average P/S of 1.18.
Finally, we should also recognize that SAN has a P/CF ratio of 4.89. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. SAN's current P/CF looks attractive when compared to its industry's average P/CF of 11.80. Over the past 52 weeks, SAN's P/CF has been as high as 5.35 and as low as 3.71, with a median of 4.51.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Banco Santander is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SAN feels like a great value stock at the moment.
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Banco Santander, S.A. (SAN) : Free Stock Analysis Report
