Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Santander Consumer USA Inc. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Santander Consumer has a trailing twelve months PE ratio of 6.0, as you can see in the chart below:
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This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.2. If we focus on the long-term PE trend, Santander Consumer’s current PE level puts it below its midpoint over the past three years, with the number remaining somewhat stable over the past few months.
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Further, the stock’s PE also compares favorably with the Zacks classified Financial - Consumer Loans industry’s trailing twelve months PE ratio, which stands at 10.6. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
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We should also point out that Santander Consumer has a forward PE ratio (price relative to this year’s earnings) of just 6.3, so it is fair to say that a slightly more value-oriented path may be ahead for Santander Consumer stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Santander Consumer has a P/S ratio of about 0.7. This is significantly lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
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If anything, SC is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Santander Consumer currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Santander Consumer a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Apple is just 1.25, a level that is lower than the industry average of 1.54. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 0.9, which is far better than the industry average of 2.7. Clearly, SC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Santander Consumer might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives SC a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current quarter has seen no estimates going higher in the past sixty days compared to two lower, while the full year estimate has seen two up and one down in the same time period.
As a result, the current quarter consensus estimate has fallen by 12.2% in the past two months, while the full year estimate has also inched lower by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Notably, the stock has a long term expected earnings growth of 5% and sports a Zacks Rank #3 (Hold). These mixed expectations indicate that while the stock’s growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Santander Consumer is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 43% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial - Consumer Loans industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Santander Consumer a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Santander Consumer USA Inc. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Santander Consumer has a trailing twelve months PE ratio of 6.0, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.2. If we focus on the long-term PE trend, Santander Consumer’s current PE level puts it below its midpoint over the past three years, with the number remaining somewhat stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Financial - Consumer Loans industry’s trailing twelve months PE ratio, which stands at 10.6. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that Santander Consumer has a forward PE ratio (price relative to this year’s earnings) of just 6.3, so it is fair to say that a slightly more value-oriented path may be ahead for Santander Consumer stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Santander Consumer has a P/S ratio of about 0.7. This is significantly lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, SC is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Santander Consumer currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Santander Consumer a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Apple is just 1.25, a level that is lower than the industry average of 1.54. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 0.9, which is far better than the industry average of 2.7. Clearly, SC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Santander Consumer might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives SC a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed. The current quarter has seen no estimates going higher in the past sixty days compared to two lower, while the full year estimate has seen two up and one down in the same time period.
As a result, the current quarter consensus estimate has fallen by 12.2% in the past two months, while the full year estimate has also inched lower by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Santander Consumer USA Holdings Inc. Price and Consensus
Santander Consumer USA Holdings Inc. Price and Consensus | Santander Consumer USA Holdings Inc. Quote
Notably, the stock has a long term expected earnings growth of 5% and sports a Zacks Rank #3 (Hold). These mixed expectations indicate that while the stock’s growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Santander Consumer is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 43% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial - Consumer Loans industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>