Retire wealthy: why the Santander share price could smash the FTSE 100

Banco Santander SA (LON: BNC) appears to offer superior value for money compared to the wider FTSE 100 (INDEXFTSE: UKX).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The share price of Santander (LSE: BNC) may have fallen in recent months, but following its 20% decline in the last year, the stock now appears to offer better value for money than the FTSE 100. This could indicate that it has the potential to outperform the index over the long run.

Of course, there are other shares which could beat the UK’s main index. Reporting on Monday was a company that seems to be performing well, and which could offer growth at a reasonable price. As such, now could be the right time to buy both stocks for the long run.

Impressive performance

The company in question is consumer security software specialist Kape Technologies (LSE: KAPE). It released interim results that showed a rise in revenue from core activities of 14.2%, increasing to $24.1m. Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) increased by 45.1% to $4.3m, with the business achieving significant progress in developing its software as a service (SaaS) revenue model.

Following the end of the half-year period, the company acquired Intego. It is a highly complementary business that could help the company to deliver against its key growth priorities. It expects the momentum from the first half to continue into the second half of the year, and this could help to catalyse its share price performance.

With Kape forecast to post a rise in earnings of 20% in the current year, followed by further growth of 39% next year, it appears to have a bright future. Its price-to-earnings growth (PEG) ratio of 0.7 suggests that it could offer good value for money at the present time.

Low valuation

Also offering a low valuation is Santander. Following its share price fall over the last 12 months, it now trades on a price-to-earnings (P/E) ratio of around 9. This suggests that it offers a wide margin of safety, and may be able to deliver FTSE 100-beating performance over the medium term.

The bank’s income potential appears to be impressive. It has a dividend yield of 5.4% at the present time from a payout which is covered more than twice by profit. This suggests that there is scope for a fast pace of dividend growth over the medium term. The bank’s earnings growth of 5% this year and 9% next year are likely to make its management team increasingly confident in the financial prospects for the company.

With Santander being a global operation, it may benefit more than some of its UK peers from continued world GDP growth. Despite the risk of a full-scale trade war, the US and China continue to offer strong growth forecasts. This could help to catalyse the financial performance of the company, and also improve investor sentiment. As such, now could be the right time to buy it, the company having the potential to boost an investor’s retirement savings prospects.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »