If you are wondering whether Banco Santander is still good value after its big run, or if you are turning up just as the party is ending, this article will walk you through what the numbers say about the stock.
The share price has climbed 2.1% over the last week, 7.2% over the last month, and an eye-catching 115.5% year to date, building on a 109.0% 1-year gain and a 318.3% return over 5 years.
Much of this strength has been associated with a friendlier European rate backdrop and improving sentiment toward banks with global retail and corporate franchises. Investors have also been rewarding lenders that are tightening costs and focusing on capital returns. Banco Santander has featured prominently in discussions about European financials benefiting from structural efficiency programs and a gradual normalization in credit conditions, which helps frame these outsized gains as more than just a short-term bounce.
Even after that rally, Banco Santander scores a 4/6 valuation check, suggesting it still screens as undervalued on several fronts. In this article we will walk through different valuation approaches to see how robust that signal is, and then finish by looking at another way to think about what the stock may be worth.
Approach 1: Banco Santander Excess Returns Analysis
The Excess Returns model looks at how much value a bank can create above the minimum return its shareholders require. In simple terms, it compares the return on equity with the cost of equity, then projects how long the bank can keep generating that extra value.
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 Cost of Equity works out to €0.73 per share. That leaves an Excess Return of about €0.30 per share, indicating that the bank is modeled to earn more than its shareholders require.
Over time, analysts in this framework model the Stable Book Value rising to about €7.80 per share, based on forecasts from 9 analysts. Feeding these inputs into the Excess Returns framework produces an intrinsic value estimate of roughly €12.00 per share, which in this model suggests the stock is about 20.9% undervalued.
Result: UNDERVALUED
Our Excess Returns analysis suggests Banco Santander is undervalued by 20.9%. Track this in your watchlist or portfolio, or discover 902 more undervalued stocks based on cash flows.
Story Continues
SAN Discounted Cash Flow as at Dec 2025
Approach 2: Banco Santander Price vs Earnings
For a profitable bank like Banco Santander, the price to earnings ratio is a natural way to judge value because it links what investors pay today with the profits the business is already generating. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher risk warrant a lower multiple.
Banco Santander currently trades at about 10.9x earnings, close to both the broader banks industry average of roughly 10.6x and the peer group average of about 11.0x. On those simple comparisons, the shares look fairly typical for a large, diversified bank.
Simply Wall St goes a step further with its Fair Ratio, an estimate of the multiple a stock should trade on after adjusting for its earnings growth outlook, profitability, risk profile, industry and market cap. For Banco Santander, this Fair PE Ratio is 12.3x, which sits meaningfully above the current 10.9x. That suggests the market is not fully pricing in the bank’s fundamentals and risk profile, even after the recent rally.
Result: UNDERVALUED
BME:SAN PE Ratio as at Dec 2025
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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 where you turn your view of a company into a story that connects your assumptions for future revenue, earnings and margins to a financial forecast and then to a fair value estimate. On Simply Wall St’s Community page, used by millions of investors, you can create or follow Narratives that make this process accessible by starting with the big picture story, translating it into numbers and then comparing the resulting Fair Value to the current share price to decide whether Banco Santander looks like a buy, a hold or a sell. Because Narratives update dynamically when new information arrives, like earnings reports, regulatory changes or dividend announcements, your fair value view automatically adjusts with the latest data instead of going stale. For example, one Banco Santander Narrative might assume revenue grows near 9% a year with margins in the mid 20s, supporting a fair value around €9.5. A more cautious Narrative that bakes in slower growth, margin pressure in Latin America and regulatory costs could justify a fair value closer to €5.8, showing how reasonable investors can reach very different conclusions from the same set of facts.
Do you think there’s more to the story for Banco Santander? Head over to our Community to see what others are saying!
BME:SAN Earnings & Revenue History as at Dec 2025
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.
Companies discussed in this article include SAN.MC.
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