DCF Studio

    SAN.MC · MCE · Financial Services

    Banco Santander, S.A.

    Also onConsensus Drift

    Implied value per share

    EUR 2.74

    Market price

    EUR 12.52

    Implied upside

    -78.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedCapital expenditure runs at 18.6% of revenue against depreciation of 5.4%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR 2.74-78.1%
    Exit multiple
    EUR 9.24-26.2%
    Market price
    EUR 12.52

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 62.1bnEUR 64.2bnEUR 66.5bnEUR 68.7bnEUR 71.1bn+3.4%
    EBITEUR 17.8bnEUR 18.4bnEUR 19.0bnEUR 19.7bnEUR 20.4bn+3.4%
    NOPATEUR 13.3bnEUR 13.8bnEUR 14.3bnEUR 14.8bnEUR 15.3bn+3.4%
    Add depreciation & amortisationEUR 3.3bnEUR 3.5bnEUR 3.6bnEUR 3.7bnEUR 3.8bn+3.4%
    Less capital expenditureEUR -11.5bnEUR -11.9bnEUR -12.4bnEUR -12.8bnEUR -13.2bn+3.4%
    Less increase in working capitalEUR -2.1bnEUR -2.1bnEUR -2.2bnEUR -2.3bnEUR -2.4bn+3.4%
    Free cashflow to firmEUR 3.0bnEUR 3.2bnEUR 3.3bnEUR 3.4bnEUR 3.5bn+3.4%
    Discount factor0.96800.90720.85010.79670.7466-
    Present valueEUR 3.0bnEUR 2.9bnEUR 2.8bnEUR 2.7bnEUR 2.6bn-3.1%
    Present Value Of The ForecastEUR 13.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.955Reported 0.933, pulled toward 1.0 (Blume)
    Cost of equity10.41%Risk-free + beta x equity risk premium
    Cost of debt6.20%Implied cost of debt of 18.2% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationEUR 181.7bn35.8% of capital
    Total debtEUR 326.2bn64.2% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.71%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareEUR 2.74

    93% of EV

    Forecast FCFF, final year
    EUR 3.5bn
    Capex at depreciation, working capital in reinvestment
    EUR 15.3bn
    Less reinvestment at g/ROIC (37.3% of NOPAT)
    EUR -5.7bn
    Capitalised
    EUR 9.6bn
    ROIC (WACC floor)
    6.7%
    Terminal value, undiscounted
    EUR 233.2bn
    Terminal value, discounted
    EUR 174.1bn
    Enterprise value
    EUR 188.0bn
    Less net debt
    EUR 146.9bn
    Equity value
    EUR 41.1bn

    Exit at 15.0x EBITDA

    Value per shareEUR 9.24

    95% of EV

    Terminal value, undiscounted
    EUR 363.5bn
    Terminal value, discounted
    EUR 271.4bn
    Enterprise value
    EUR 285.3bn
    Less net debt
    EUR 146.9bn
    Equity value
    EUR 138.4bn

    Spread between methods: 108%.

    Sensitivity

    Value per share (EUR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.71%9.029.119.209.289.37
    5.71%5.255.325.395.465.53
    6.71%2.632.692.742.802.86
    7.71%0.700.750.800.850.89
    8.71%-0.77-0.73-0.69-0.65-0.61

    Outlined: this model. Green text: above today's price of 12.52. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.4%20.6%+17.1pp
    EBIT margin28.6%46.5%+17.9pp
    Discount rate6.7%4.1%-2.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.