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E*TRADE (ETFC) Moves Up 12.1% YTD: Is More Upside Left?
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During the last earnings season, performance of the financial stocks was decent. One such investment bank — E*TRADE Financial Corporation — has rallied 12.1% year to date, significantly outperforming the industry’s slight decline.
This price performance is backed by the gradually improving operating environment and rate hike scenario, which is beneficial for brokerage business. Furthermore, anticipated improvement in trading activities and several of its ongoing initiatives bode well for E*TRADE.
Apart from this, E*TRADE is part of the industry, which has a Zacks Industry Rank #88 (top 34%).
Moreover, the stock seems undervalued on the basis of its price-to-earnings (P/E) and price-to-book (P/B) ratios. E*TRADE has a P/E ratio of 16.26 compared with the S&P 500 average of 16.61. Also, the company’s P/B ratio of 2.27 is below the S&P 500 average of 3.11.
Additionally, the estimates for this Zacks Rank #2 (Buy) stock have been on an upswing. Over the last 60 days, the Zacks Consensus Estimate has moved up 3.8% and 1.4% for 2018 and 2019, respectively.
Fundamentally, E*TRADE’s earnings have jumped 29.5% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. The company’s projected EPS (earnings per share) growth (F1/F0) is 49.3% for 2018 and (F2/F1) nearly 13% for 2019.
Over the last three years (2015-2017), the company recorded a benefit to provision for loan losses. We believe that this benefit is driven by the company’s efforts to shrink its balance sheet. Its provisions will likely trend at normalized levels, thereby supporting the bottom line.
Further, with a rise in rates, brokerage firms are likely to engage in more investment activities. As brokerage firms earn interest income on un-invested cash in customer accounts, the rate hikes will enable these firms to invest at higher rates. As E*TRADE currently derives nearly 60% of its total net revenues from net interest income, the company is poised to benefit from the recent rate hikes.
Additionally, E*TRADE is focused on derivatives mix with a target of increasing it to 35% of daily average revenue trades and also set managed account assets under management target of $6 billion within the next two years. The company aims to achieve 2-3% improvement in its rate of annual organic growth, across accounts, assets and trades.
Interactive Brokers’ earnings estimates have been revised around 1% upward for 2018, in the past 30 days. Also, its share price has surged 54.5% in six months’ time.
TD Ameritrade’s earnings estimates for 2018 have been revised 2.7% upward, over the last 60 days. Further, in six months’ time, the company’s shares have jumped 20.3%.
Stifel Financial witnessed slight upward earnings estimates revision for the current year, in the past two months. Moreover, over the past six months, its shares have gained 9.5%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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E*TRADE (ETFC) Moves Up 12.1% YTD: Is More Upside Left?
During the last earnings season, performance of the financial stocks was decent. One such investment bank — E*TRADE Financial Corporation — has rallied 12.1% year to date, significantly outperforming the industry’s slight decline.
This price performance is backed by the gradually improving operating environment and rate hike scenario, which is beneficial for brokerage business. Furthermore, anticipated improvement in trading activities and several of its ongoing initiatives bode well for E*TRADE.
Apart from this, E*TRADE is part of the industry, which has a Zacks Industry Rank #88 (top 34%).
Moreover, the stock seems undervalued on the basis of its price-to-earnings (P/E) and price-to-book (P/B) ratios. E*TRADE has a P/E ratio of 16.26 compared with the S&P 500 average of 16.61. Also, the company’s P/B ratio of 2.27 is below the S&P 500 average of 3.11.
Additionally, the estimates for this Zacks Rank #2 (Buy) stock have been on an upswing. Over the last 60 days, the Zacks Consensus Estimate has moved up 3.8% and 1.4% for 2018 and 2019, respectively.
Fundamentally, E*TRADE’s earnings have jumped 29.5% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. The company’s projected EPS (earnings per share) growth (F1/F0) is 49.3% for 2018 and (F2/F1) nearly 13% for 2019.
Over the last three years (2015-2017), the company recorded a benefit to provision for loan losses. We believe that this benefit is driven by the company’s efforts to shrink its balance sheet. Its provisions will likely trend at normalized levels, thereby supporting the bottom line.
Further, with a rise in rates, brokerage firms are likely to engage in more investment activities. As brokerage firms earn interest income on un-invested cash in customer accounts, the rate hikes will enable these firms to invest at higher rates. As E*TRADE currently derives nearly 60% of its total net revenues from net interest income, the company is poised to benefit from the recent rate hikes.
Additionally, E*TRADE is focused on derivatives mix with a target of increasing it to 35% of daily average revenue trades and also set managed account assets under management target of $6 billion within the next two years. The company aims to achieve 2-3% improvement in its rate of annual organic growth, across accounts, assets and trades.
Other Stocks to Consider
Other top-ranked stocks in the same space include Interactive Brokers Group, Inc. (IBKR - Free Report) , TD Ameritrade Holding Corporation (AMTD - Free Report) and Stifel Financial Corporation (SF - Free Report) . All the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Interactive Brokers’ earnings estimates have been revised around 1% upward for 2018, in the past 30 days. Also, its share price has surged 54.5% in six months’ time.
TD Ameritrade’s earnings estimates for 2018 have been revised 2.7% upward, over the last 60 days. Further, in six months’ time, the company’s shares have jumped 20.3%.
Stifel Financial witnessed slight upward earnings estimates revision for the current year, in the past two months. Moreover, over the past six months, its shares have gained 9.5%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>