Santander Consumer USA Holdings Inc (NYSE:SC), a diversified financials company based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on SC’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Santander Consumer USA Holdings
What’s the opportunity in SC?
According to my relative valuation model, SC seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.6x is currently trading slightly below its industry peers’ ratio of 14.8x, which means if you buy SC today, you’d be paying a reasonable price for it. And if you believe SC should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since SC’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much SC moves relative to the rest of the market.
Can we expect growth from SC?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of SC, it is expected to deliver a relatively unexciting earnings growth of 6.13%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for SC, at least in the near term.
What this means for you:
Are you a shareholder? SC’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 SC? 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 an eye on SC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SC, which means it’s worth further examining 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 Santander Consumer USA Holdings. You can find everything you need to know about SC in the latest infographic research report. If you are no longer interested in Santander Consumer USA Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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