Fundamental Analysis: Charles Schwab (#SCHW)

The Charles Schwab Corporation is an American multinational financial services company. It offers banking, commercial banking, an electronic trading platform, and wealth management advisory services to both retail and institutional clients


The US brokerage Charles Schwab #SCHW has recently received positive readings from major analysts that gave a Buy rating as the company can use structural changes and long-term trends to increase profits for years to come.


⚡️ Growth factors:

  • As a leader in retail brokerage, #SCHW is capitalizing on the surge in retail investors that could lead to new clients in the company's investment arm.

  • Charles Schwab also expects higher monetization from outside managers as the company continues to add a variety of financial products and services to its retail customers. With this, the company can increase operating profitability and add ~ $ 2 billion to revenue.

  • Higher bond market yields could generate an additional ~ $ 4.4bn in revenue, and the cost synergy from the merger with TD Ameritrade will help contain costs as revenue rises.

  • Earnings are forecast to grow 14.59% per year

  • Earnings have grown 16.3% per year over the past 5 years


📖 Financial indicators

  • Stable Share Price: SCHW is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 5% a week.

  • Return vs Market: SCHW exceeded the US Market which returned 58.2% over the past year compared to 83.5%

  • Growing Profit Margin: SCHW's current net profit margins (26.6%) are lower than last year (31.6%).

  • Short Term Liabilities: SCHW's short term assets ($189.1B) do not cover its short term liabilities ($473.7B).

  • Long Term Liabilities: SCHW's short term assets ($189.1B) exceed its long term liabilities ($34.2B)

  • Debt Coverage: SCHW's debt is well covered by operating cash flow (35.7%).

  • Stable Dividend: SCHW's dividends per share have been stable in the past 10 years

  • Below Fair Value: SCHW ($65.4) is trading below our estimate of fair value ($76)

OTB Global Investments

22 April 2021

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