Is There Still Time To Buy Banco Santander SA?

Can Banco Santander SA (LON: BNC) move higher, or are the company’s shares overvalued?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at Banco Santander (LSE: BNC) (NYSE: SAN.US) to ascertain if its share price has the potential to push higher. 

Current market sentimentsantander

The best place to start assessing whether or not Santander’s share price has the potential to push higher, is to take a look at the market’s current opinion towards the company.

It would appear that at present, the market is cautiously optimistic about Santander’s outlook, as the economic situation within Europe improves.

What’s more, after a dismal 2012, when Santander’s profit collapsed by nearly 50%, the revelation earlier this year that the bank’s profit had jumped 90% during 2013 impressed investors. Rising profits were thanks in part to falling bad debt provisions, the total of which fell to €1.7bn for the year.

Upcoming catalysts

However, there are several major upcoming catalysts that could quickly change investors cautious outlook on Santander.

For example, the economic recovery within Europe, Spain in particular, remains fragile and Santander could report further bad debt losses if the situation deteriorates. 

There is also the issue of Santander’s financial position, as the bank has come under scrutiny during the past few years for not holding enough capital. 

And finally, Santander is at risk from an economic slowdown within emerging markets, South America especially, where the bank generates around half of its income. The IMF has recently downgraded growth forecasts for the region and the Fund now expects Brazil’s economy, the largest on the continent, to grow by only 1.8% during 2014. 

Nevertheless, Santander’s current outlook is a lot brighter than it was just a year or two ago and if things go well, City forecasts expect the bank’s profit to jump 26% during 2014. 

Valuation

With earnings growth of 26% pencilled in for 2014, Santander’s earnings are set to hit 40p per share for this year, which puts the company’s shares on a forward P/E of 14.4.  

Unfortunately, this high valuation makes Santander look expensive in comparison to other London listed peers. Barclays, for example, currently trades at a forward P/E of closer to 9.

Foolish summary

Overall, with so many risks facing bank and its high valuation, I feel that Santander is overvalued at current levels. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert owns shares in Barclays. 

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

£9,000 in savings? That could become passive income of £19,175 a year

It's possible to invest affordable sums of money into building a big passive income stream. Here's how I'd go about…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Legal & General shares: a once-in-a-decade passive income opportunity?

Is a dividend yield at its highest level in a decade, combined with a strong record of increasing payouts, a…

Read more »

Investing Articles

With a 7% yield and 4.1 P/E, is this the best passive income stock on the FTSE 350?

Millions of Britons invest for a passive income. While our writer isn't buying this stock yet, he believes it's worth…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he's not keen…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could this brilliant airline stock be the most undervalued company on the FTSE 100?

Our writer believes this FTSE 100 stock may provide market-beating returns over the coming years, noting its undervalued metrics and…

Read more »