Why Banco Santander SA plc Is Exceptional Value For Money

In this article I am looking at why I believe Banco Santander SA (LSE: BNC) is a star pick for those seeking attractively priced stock selections.

Price to Earnings (P/E) Ratio

The overhanging effect of the 2008/2009 banking crisis, particularly on the fiscally-fragile economies of Southern Europe, has Santandercaused Santander to punch colossal double-digit earnings declines in four of the past five years.

However, with significant write-downs — particularly in the bombed-out Spanish property sector — now largely behind it, massive restructuring ongoing and a steady recovery in the global economy underway, the company is expected to witness further growth following last year’s massive 74% rise.

Based on current broker estimates, Santander currently changes hands on a P/E rating of 16.2 for 2014 — sailing above an average of 15.2 for the entire banking sector — but which drops to 13.2 for next year.

Price to Earnings to Growth (PEG) Ratio

These projections are underpinned by stratospheric growth rates of 20% and 23% for 2014 and 2015 correspondingly, figures which produce ultra-low PEG readouts of 0.8 and 0.6. A reading of 1 is considered to be the vanguard of terrific value, so Santander’s readings below this figure are clearly a snip.

Market to Book Ratio

After total liabilities are subtracted from total assets, Santander’s book value comes out at £64.8bn. This produces a book value of £5.71 per share which, as a consequence, produces a market to book value of 1.1. A readout of 1 or under is widely regarded as stupendous value.

Dividend Yield

Santander has a terrific history of offering whopping, market-leading yields for many years now, and is expected to continue blasting the competition in the coming years, even if it is anticipated to rein in payouts in line with earnings. Last year the bank elected to shell out a 60 euro cent per share dividend, far in excess of earnings of 40 cents per share.

Indeed, the business is expected to cut the dividend to 57.7 cents in 2014 and 50.5 cents next year. But investors should bear in mind that these predicted payments create monster yields of 7.4% and 6.5% respectively, well ahead of a forward average of 3% for the banking industry and 3.2% for the FTSE 100.

A Bankable Stock Market Bargain

In my opinion Santander is a bargain stock for those seeking both gigantic growth and income prospects at exceptional prices. The bank was recently upgraded by Fitch and Standard and Poor’s on the back of improved Spanish sovereign debt ratings, underlining the economic recovery in the company’s home market and bolstering current forecasts.

And with the business also boosting its exposure to lucrative emerging markets — these account for around 45% of group profit at present — I believe that earnings and dividend growth should continue rolling higher.

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Royston does not own shares in Banco Santander SA.