Judging Santander (LSE: BNC) solely on its recent share price performance would lead most investors to decide that it’s a stock to avoid. That’s because the banking giant has recorded an extremely disappointing share price fall of 34% in the last year, with it offering little hope of a sustained turnaround in that time.
However, a turnaround is most certainly on the cards for Santander. It may suffer yet further from weakness in a number of its key markets, but the crucial takeaway for investors is that Santander’s share price now seems to fully price-in further pain. In other words, it offers a relatively wide margin of safety, as evidenced by a price-to-earnings (P/E) ratio of just 9.2.
Furthermore, Santander offers an excellent income outlook. It currently yields 4.6% and with dividends being covered 2.4 times by profit, there’s considerable scope for them to rise at a high rate over the coming years. As such, Santander’s total return from dividends as well as an upward rerating could help its investors retire early.
Making light work
While Santander’s share price has slumped in the last year, professional lighting specialist FW Thorpe (LSE: TFW) has recorded a rise of 38%. And looking ahead, there could be further gains to come since FW Thorpe is performing well.
In its most recent half-year results, FW Thorpe was able to deliver a 26% increase in sales and a 14% rise in earnings. Although these numbers were aided by the acquisition of Lightronics, even with that purchase excluded, FW Thorpe was still able to post a rise in sales of 5% and an increase in earnings of 7.5%. And with Lightronics performing ahead of expectations, its long-term future is highly encouraging.
Although FW Thorpe trades on a P/E ratio of 23.7, it could still offer further capital gains over the medium-to-long term. The increase in dividends of 9% as well as a special dividend of 2p per share show that FW Thorpe’s management has confidence in the long-term outlook for the business, which indicates that now could be a good time to buy.
Scope for rising payouts
Meanwhile, information management solutions specialist Idox (LSE: IDOX) also has a bright future. It’s expected to grow its bottom line by 12% in the current financial year and by a further 8% next year. This has the potential to cause an improvement in investor sentiment in the stock even after its 50% share price rise over the last 12 months.
With Idox trading on a price-to-earnings growth (PEG) ratio of just 1.3, it holds considerable growth and value appeal. And due to dividends being covered 3.7 times by profit, there’s scope for a rapid rise in shareholder payouts to boost Idox’s 1.7% yield.
