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3 Stocks Trading Far Too Cheaply: Banco Santander SA, Royal Mail PLC And Taylor Wimpey plc

Today I am looking at three FTSE stocks that should be attracting glances from all savvy value hunters.

Banco Santander

Global banking giant Santander (LSE: BNC) has seen its share price shuttle steadily lower during the past 12 months, and the stock is now rattling around three-year lows having fallen 31% from January. While this is understandable given fresh fears over the global economy, I reckon the bank’s expanding operations across Latin America — not to mention brilliant exposure to the UK and North America — should deliver splendid long-term returns.

Massive restructuring since the 2008/2009 banking crisis has left Santander a much more efficient and focussed earnings-creating machine, leaving it better placed to absorb any bumps in key end markets. Consequently the City expects Santander to enjoy earnings growth of 8% in 2015 and 11% in 2016, resulting in ultra-low P/E ratios of just 11 times and 9.9 times respectively — any reading below 10 times is broadly considered too good to pass up on.

Santander’s poor price performance since January has hardly been helped by the decision to rebase the dividend in a bid to rebuild the balance sheet. Still, a planned payment of 20 euro cents per share for this year still yields a very decent 3.3%, in line with the market average. And the bank’s strong growth story is expected to blast the reward to 22 cents in 2016, nudging the yield to 3.7%.

Royal Mail

Like Santander, Britain’s largest courier Royal Mail (LSE: RMG) hasn’t had the rub of the green in recent weeks, with heavy weakness since mid-July taking a huge bite out of 2015’s gains — the stock is now up just 7% from January. But thanks to the exit of City Link last year, and Whistl closing its letters division more recently, Royal Mail now has a clear run on the UK market, while its GLS operations overseas are also paying off handsomely.

Although the London firm faces an Ofcom competition probe into its role in the market, Royal Mail is unlikely to face draconian action that could threaten its ability to effectively service Britain’s households, in my opinion. The result of huge restructuring is expected to push earnings 22% lower in the year ending March 2016, although this still leaves the business dealing on an attractive P/E ratio of 12.7 times. And a 7% rebound next year cuts this reading to just 12.5 times.

And given the firm’s bubbly long-term growth picture, the City expects Royal Mail to deliver a chunky 21.7p per share dividend in the current period, resulting in a gigantic 4.5% yield. And this reading moves to 4.7% for 2017 thanks to predictions of a 22.6p reward.

Taylor Wimpey

Even though housebuilder Taylor Wimpey (LSE: TW) has also seen its share price recede more recently, the business has been the best performer across the FTSE 100 since the start of 2015 and shares are currently 67% higher from January. Still, it could be argued that the business remains chronically undervalued, with Britain’s deteriorating supply/demand imbalance widely anticipated to keep powering earnings skywards.

Indeed, the City expects Taylor Wimpey to report a 33% earnings bounce in 2015, resulting in a P/E ratio of just 13.9 times. And a further 15% advance in 2016 pushes this reading still lower, to 12.1 times. On top of this, sub-1 PEG multiples through to the close of next year underline the idea that the housebuilder’s current price fails to reflect its terrific growth potential — just this week the ONS advised that house price inflation rose to 5.7% in the year to June, up from 5.6% the previous month.

With profits heading higher and cash balances continuing to swell, the City expects Taylor Wimpey to furnish investors with a bumper 9.3p per share dividend in 2015, yielding a brilliant 4.6%. And predictions of a 10.5p payment next year drive the dividend to an eye-watering 5.1%.

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Royston Wild owns shares of Taylor Wimpey. 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.