Here's Why We Think Banco Santander (BME:SAN) Is Well Worth Watching

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Banco Santander (BME:SAN). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is Banco Santander Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Banco Santander's EPS has grown 19% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted that Banco Santander's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Banco Santander maintained stable EBIT margins over the last year, all while growing revenue 6.4% to €51b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

View our latest analysis for Banco Santander

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Banco Santander's future profits.

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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold €6.8k worth of shares. But that's far less than the €980k insiders spent purchasing stock. This bodes well for Banco Santander as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Independent Vice Chair & Lead Independent Director Glenn Hutchins who made the biggest single purchase, worth €875k, paying €6.35 per share.

On top of the insider buying, it's good to see that Banco Santander insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth €1.1b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Banco Santander To Your Watchlist?

For growth investors, Banco Santander's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Banco Santander that you need to take into consideration.

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 curated collection of companies in ES that have an attractive valuation alongside insider buying in the last three months.

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.