When Should You Buy Banco Santander SA (BME:SAN)?

Let’s talk about the popular Banco Santander SA (BME:SAN). The company’s shares received a lot of attention from a substantial price movement on the BME over the last few months, increasing to €4.57 at one point, and dropping to the lows of €3.98. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Banco Santander’s current trading price of €3.98 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Banco Santander’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Banco Santander

Is Banco Santander still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15% below my intrinsic value, which means if you buy Banco Santander today, you’d be paying a fair price for it. And if you believe that the stock is really worth €4.7, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Banco Santander’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Banco Santander look like?

BME:SAN Future Profit December 8th 18
BME:SAN Future Profit December 8th 18
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 49% over the next couple of years, the future seems bright for Banco Santander. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? SAN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on SAN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Banco Santander. You can find everything you need to know about Banco Santander in the latest infographic research report. If you are no longer interested in Banco Santander, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.