Do Price Falls Make Banco Santander SA, Centrica PLC And GlaxoSmithKline plc Look Like Bargains?

We usually hear much wailing when the FTSE 100 falls, and it’s down around 100 points today due to what’s happening in Greece. But those investing for the long term should rejoice and look for opportunities to pick up some bargain shares, and I’ve been checking out a few that could make for nice bargains now…


Banco Santander (LSE: BNC)(NYSE: SAN.US) shares have fallen 21% over the past 12 months, to 455p — and that comes after the bank has reversed its earnings decline, put in two years of strong growth, and is forecast to see EPS rise by 12% this year and 11% next. The dividend has been slashed, but that ended a crazy policy of paying very high dividends that were nowhere near covered by earnings, in the hope that people would take scrip instead of cash — we’re now looking at yields forecast of 2.9% and 3.3%.

The P/E would drop to 12.8 this year and 11.5% next, based on current expectations, which is a good bit below the FTSE average. But there is the fact that Santander is based in Spain, and there must be fears that Spain could go the way of Greece, so that’s possibly holding the price down.


A strong high-dividend utilities company can be a good one to have in your portfolio, and Centrica (LSE: CNA) fits the bill nicely. Its dividend is expected to drop a little this year, but should still yield around 4.4% — and the City is predicting a rise to 4.5% a year later.

But over the past year the share price has fallen 12% to 39p, and by 24% over two years. That’s partly justified by a fall to a lower lever of earnings on the back of plummeting oil prices and a competitive pricing squeeze, but the shares are still on a forward P/E of about 15 — and I think that’s good value for such a solid dividend payer.

Pills and potions

Finally I come to GlaxoSmithKline (LSE: GSK)(NYSE: GSK.US), whose shares are down 13% in a year — 2015 started out strongly, but since a peak in April the price has fallen back down to 1,359p. Our big FTSE 100 pharmaceuticals companies have been struggling to get back to earnings growth in recent years, and AstraZeneca was looking like the turnaround star for a while. But 2015 is expected to see the end of the slump for Glaxo with a 16% fall in EPS, and then a return to growth with a 10% rise pencilled in for 2016.

Dividend yields of better than 6% should only just be covered, but if we do get the likely growth return, the firm should be able to maintain them. On a 2016 P/E of 15.5 is Glaxo a comeback bargain? It could well be.

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