Does Banco Santander (BME:SAN) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Banco Santander (BME:SAN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Banco Santander

How Quickly Is Banco Santander Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Banco Santander has grown EPS by 21% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Banco Santander's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Banco Santander remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to €41b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Banco Santander's future EPS 100% free.

Are Banco Santander Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The real kicker here is that Banco Santander insiders spent a staggering €3.7m on acquiring shares in just one year, without single share being sold in the meantime. Knowing this, Banco Santander will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the Group Executive Chairwoman, Ana Botin-Sanz de Sautuola y O'Shea, who made the biggest single acquisition, paying €2.9m for shares at about €2.85 each.

The good news, alongside the insider buying, for Banco Santander bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth €377m. We note that this amounts to 0.8% of the company, which may be small owing to the sheer size of Banco Santander but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Does Banco Santander Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Banco Santander's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. Before you take the next step you should know about the 1 warning sign for Banco Santander that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Banco Santander, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.