The World’s Hottest Growth Stocks: Banco Santander SA

Today I am outlining why Banco Santander (LSE: BNC) (NYSE: SAN.US)could be considered a terrific stock for growth hunters.

Playing the developing markets game

Santander hit the headlines in recent days after longstanding chairman Emilio Botín unexpectedly died on Tuesday night, with daughter Ana Botín subsequently marked out to take the reins. Mr Botín had held the role since the mid-1980s and oversaw the firm’s aggressive expansion into Latin America as well as other markets including the UK, moves that created the banking behemoth which we know today.

And it is this legacy of massive acquisition activity that I believe should generate massive earnings growth in coming years, particularly on Santanderthe back of the rising might of emerging regions.

The company currently sources almost four-tenths of group profit from Latin America, half of which is generated from regional powerhouse Brazil. And the bank continues to expand its presence on the continent — indeed, in April the company announced plans to acquire the remaining 25% interest in Banco Santander Brasil which it does not currently own.

Despite signs of economic cooling in these regions, Santander is playing the long game in Latin America and expects a backdrop of rising personal income levels and subsequent demand for banking products to underpin solid earnings expansion in coming years.

And although deteriorating financial health in Europe remain a concern, the firm’s reduced footprint in riskier areas — most notably the Spanish property sector — should help to guard against catastrophic losses should further macroeconomic turbulence occur.

Rip-roaring growth on the cards

A backcloth of improving economic conditions in Europe, extensive restructuring at the firm, and fewer bad loans and write-offs has allowed Santander to finally put years of earnings pressure behind it, culminating in last year’s huge 74% earnings improvement.

And City consensus suggests that Santander is poised to post further solid growth this year and next, with earnings expansion in the region of 22% pencilled in for both 2014 and 2015.

These projections create a P/E multiple of 15.7 times forward earnings for this year — just above territory of 15 or below which dictates reasonable value for money — and which drops sharply to 12.9 for 2015.

And the firm’s splendid earnings prospects are underlined by mega-low price to earnings to growth (PEG) readouts for this year and next, which register at just 0.7 and 0.6 respectively. Any reading below 1 is widely regarded as stupendous value, underlining my conviction that Santander is a terrific growth selection for savvy stock pickers.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.