Does Santander’s 2025 Valuation Still Make Sense After a 111.6% Year To Date Surge?

• If you are wondering whether Banco Santander is still good value after such a massive run, you are not alone. This is exactly the right moment to dig into what the market is really pricing in.
• The stock has climbed 1.1% over the last week, 5.3% over the past month, and an eye catching 111.6% year to date, building on a 113.3% 1 year gain and an even more dramatic 265.0% and 295.2% over 3 and 5 years respectively.
• These moves have come as investors refocus on European banks amid a shifting interest rate backdrop and an improving sentiment toward financials in Spain and across the eurozone. Regulatory headlines, capital return plans, and ongoing macro data have all helped frame Banco Santander as a more confident, better capitalized player in a sector that used to trade at deep discounts.
• Right now, our framework gives Banco Santander a valuation score of 4/6, suggesting the market may still be underestimating parts of its story. We will break that down using multiple valuation methods before wrapping with a more intuitive way to think about what the shares are really worth.

Banco Santander delivered 113.3% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: Banco Santander Excess Returns Analysis

The Excess Returns model looks at how much value Banco Santander creates over and above the return that investors demand on its equity capital. Instead of focusing on cash flows, it asks whether each euro of capital in the bank is being put to work at a rate that exceeds its cost.

For Banco Santander, the starting point is a Book Value of €6.82 per share and a Stable EPS of €1.03 per share, based on weighted future Return on Equity estimates from 14 analysts. The bank is expected to earn an Average Return on Equity of 13.20%, while the implied Cost of Equity is €0.73 per share. That leaves an Excess Return of €0.29 per share, suggesting Santander is generating value on top of its funding cost. Stable Book Value is projected to grow to €7.80 per share, using estimates from 9 analysts.

Combining these inputs, the Excess Returns model indicates an intrinsic value of about €11.99 per share, which is approximately 22.3% above the current market price.

Result: UNDERVALUED

Our Excess Returns analysis suggests Banco Santander is undervalued by 22.3%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Banco Santander.

Approach 2: Banco Santander Price vs Earnings

For a consistently profitable bank like Banco Santander, the price to earnings multiple is a useful way to gauge how much investors are willing to pay for each euro of current earnings. In general, faster growth and lower perceived risk justify a higher PE ratio, while slower growth or higher risk call for a lower, more conservative multiple.

Banco Santander currently trades on a PE of 10.71x, which sits slightly above the broader Banks industry average of around 10.51x and just below the peer group average of 10.95x. On the surface, that suggests the market is pricing Santander roughly in line with comparable European banks, reflecting its improved profitability and still present macro and regulatory risks.

Simply Wall St also uses a Fair Ratio of 12.29x. This is a proprietary estimate of what Santander’s PE should be once you factor in its earnings growth outlook, profitability, risk profile, industry, and market cap. This is more informative than a simple peer or industry comparison because it adjusts for Santander’s specific strengths and vulnerabilities rather than assuming all banks deserve the same multiple. With the Fair Ratio of 12.29x sitting meaningfully above the current 10.71x, the shares appear modestly undervalued on this earnings-based lens.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Banco Santander Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you spell out your story for a company, connect it to concrete forecasts for revenue, earnings and margins, and then see what fair value falls out of those assumptions. A Narrative links three things together: the business story you believe in, the financial outcomes that story implies, and the fair value you would be willing to pay or accept to buy or sell. On Simply Wall St, millions of investors build and share Narratives on the Community page, where you can quickly plug in your view, compare your fair value to the current price, and decide whether Banco Santander looks like a Buy, Hold or Sell to you. These Narratives update dynamically as new information, such as earnings results or major news, comes in, so your fair value and conviction can evolve with the facts. For example, one investor might see Banco Santander worth closer to €9.50 per share, while another might only see value around €5.80, reflecting very different expectations for its global growth, risk, and future profitability.

Do you think there's more to the story for Banco Santander? Head over to our Community to see what others are saying!

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.

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