Does Santander’s 95% Rally Signal More Room to Run After Fitch Upgrade in 2025?

Trying to figure out what to do with Banco Santander stock? You’re not alone. This bank is constantly on watchlists across Europe and beyond, and lately its price movements have drawn extra attention. Despite a slight slip of -0.8% in the last week, its 30-day return sits comfortably in positive territory at 2.1%. But the real eye-catching numbers are in the longer term. Year-to-date, the stock is up nearly 95%, with 1-year returns at 93.3% and a staggering 507% return over the past five years. Those are not the kind of numbers you ignore, especially if you’re weighing whether this stock still has room to run or if risk is re-entering the picture.

Some of this momentum can be traced back to recent developments in the European banking sector and growing investor appetite for diversified financials in a shifting market environment. That said, the story is not just about riding the long-term trend. When looking at valuation, Banco Santander checks 4 out of 6 boxes that typically point to a company being undervalued, giving it a solid value score of 4. What does that actually mean? It is a good place to start, but numbers on their own do not always tell the whole story.

Let’s break down how analysts value Banco Santander using a few tried-and-true approaches. Then, we will dig into a perspective that might help you see valuation in a whole new way.

Banco Santander delivered 93.3% 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 evaluates a company by measuring how much return it generates on invested capital compared to its cost of equity. If Banco Santander consistently earns more on its equity than it costs to fund that equity, it is typically seen as creating real value for shareholders.

In Banco Santander's case, the numbers are compelling. The bank's Book Value stands at €6.63 per share, while stable annual earnings per share are projected at €0.98, based on weighted future Return on Equity estimates from 14 analysts. With a Cost of Equity of €0.74 per share, the Excess Return amounts to €0.25 per share, and the average Return on Equity is 12.71%. Furthermore, analysts anticipate a Stable Book Value rising to €7.75 per share, indicating room for underlying growth.

Based on these results, the Excess Returns model calculates an intrinsic value approximately 22.9% above the current market price. This suggests the stock is undervalued by a significant margin. For investors, this points to the potential for further upside if these performance levels continue.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests Banco Santander is undervalued by 22.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Banco Santander Price vs Earnings

The Price-to-Earnings (PE) ratio is widely regarded as the go-to metric for valuing established, profitable companies like Banco Santander. It captures how much investors are willing to pay for each euro of current earnings, making it particularly useful when those earnings are stable and growing.

What is considered a "normal" or "fair" PE ratio depends on several factors, including expected earnings growth, risk profile, and broader industry conditions. In general, higher growth prospects or lower risk support higher PE ratios. Slower growth or increased risk typically means investors demand lower multiples.

Looking at the numbers, Banco Santander currently trades at a PE of 10.1x. This is closely aligned with both the peer average (10.15x) and the banking industry average (10.32x), suggesting the market is broadly valuing Santander in line with its sector. For a more tailored view, Simply Wall St calculates a “Fair Ratio” of 11.41x, which factors in not just peer and sector data, but also Santander’s specific growth, risk profile, margins, and market cap.

Unlike basic industry or peer comparisons, the Fair Ratio offers a more holistic benchmark by recognizing the distinct drivers that matter to Banco Santander. Because it blends both wider market context and company-specific details, this ratio can provide a sharper sense of whether the current valuation makes sense.

With Santander’s current PE of 10.1x sitting a little below the Fair Ratio of 11.41x, the stock appears to be valued slightly on the conservative side. This may point to an opportunity for investors.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Banco Santander Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative brings investment to life by letting you tell your own story about a company like Banco Santander, combining your assumptions about its future (such as expected revenue growth, profit margins, and fair value) with the financial forecasts that flow from that story.

This approach goes beyond just looking at ratios by linking the company's journey, its strategy, market strengths, and challenges, to a tailored financial outlook and a specific valuation. Narratives are simple, interactive tools available on Simply Wall St's Community page and are actively used by millions of investors to map their view of a company’s future.

Using Narratives, you can compare your own fair value of Banco Santander to the current share price and make informed decisions about when to buy or sell. As new updates or news come in, the underlying financials and valuation within each Narrative are updated automatically to help keep your perspective relevant.

For example, one investor might see rapid digital banking adoption and Latin American growth, forecasting a fair value of €8.65. Another, more cautious investor focused on margin pressures, might estimate fair value at just €4.43. This offers two very different stories behind the same stock price.

For Banco Santander, we'll make it easy for you with previews of two leading Banco Santander Narratives:

🐂 Banco Santander Bull Case

Fair value: €8.65

Current price is approximately 0.8% below fair value

Forecast revenue growth: 8.8%

• Expansion in digital banking and a focus on high-growth Latin American markets supports stable earnings and strong long-term prospects.
• Technology transformation and operational efficiency are expected to drive higher profitability and lower costs as digital adoption increases.
• Analysts anticipate steady revenue growth and softening profit margins, and believe the current share price is close to fair value based on future expectations.

🐻 Banco Santander Bear Case

Fair value: €4.43

Current price is approximately 93.6% above fair value

Forecast revenue growth: 5%

• Despite digital initiatives, online banking transformation is seen as lagging, with results yet to deliver a meaningful impact on performance.
• Competition from fintechs and big tech, margin pressures, and sectoral risks in key markets like the UK and US weigh on future profitability.
• This bearish outlook assumes slower revenue growth, reduced margins, and lower valuation multiples, leading to a much lower fair value estimate.

Do you think there's more to the story for Banco Santander? Create your own Narrative to let the Community know!

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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