With record earnings, revenues and net new client assets in fiscal 2016, TD Ameritrade Holding Corporation (AMTD Quick QuoteAMTD - Free Report) appears a solid bet now. The company’s strong trading volumes, client focus and cross-selling opportunities are expected to yield positive results for the stock.

Further, the recent interest rate hike is anticipated to bring further stability to top-line generation, which creates a buying opportunity for long-term horses. Though lack of diversity is visible, as TD Ameritrade’s operations are mainly concentrated in the U.S. and escalating costs might lead to operational inefficiency, sharper focus on organic growth is likely to make the growth path smoother for the company.

With net new client assets of about $60.3 billion as of Sep 30, 2016, TD Ameritrade’s strengths include a sturdy top-line, and earnings growth, trading activities as well as steady capital deployment actions.

Why is TD Ameritrade a Golden Egg

Benefit from Rate Hike: 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, this rate rise will allow the brokerage firms to invest at higher rates. As TD Ameritrade currently derives nearly 34% of its total asset-based revenues from net interest income, the company is set to benefit from the recent rate hike.

Strong Organic Growth: TD Ameritrade remains a leading asset gatherer with eight consecutive years of double-digit asset growth, since fiscal 2008, in net new client assets. Notably, during fiscal 2016, the company witnessed an annualized growth rate of 9% in net new client assets, within the long-term target of increasing net new client assets at an annual rate of 7–11%.

Additionally, the company’s net revenue recorded a 6% compounded annual growth rate (CAGR) over the last five years, ending fiscal 2016. The company’s projected sales growth (F1/F0) of 4.9%, as against the nil industry average, indicates consistent upward momentum in revenues.

Earnings per Share Strength: TD Ameritrade’s earnings per share have recorded a CAGR of 10.5% over the last fiscal five years (2012–2016). Earnings are expected to exhibit an upswing in the near term as the company’s projected EPS growth (F1/F0) is 5.7% compared to the negative industry average rate of 2.0%.

Strong Trading Activity: TD Ameritrade’s trading volumes have been graphing an uptrend. On a year-over-year basis, the company’s average client trades per day increased 4%, 14% and 8% in the fiscal years of 2013, 2014 and 2015, respectively, with a slight rise in 2016 as well, benefiting from the volatility in markets.

Strong Leverage: TD Ameritrade’s debt/equity ratio is valued at 0.36 compared to the S&P 500 average of 0.69, indicating relative lower debt burden. It highlights the financial stability of the company despite an unstable economic environment.

Favorable Zacks Rank: TD Ameritrade currently carries a Zacks Rank #2 (Buy). The bullish rank is driven by upward earnings estimate revisions over the last 30 days. For 2017, the Zacks Consensus Estimate inched up 1.8% to $1.67; while for 2018, it increased 5.9% to $1.96.

Steady Capital Deployment: TD Ameritrade remains focused on managing capital levels efficiently. In Oct 2016, the company declared a 6% hike in its quarterly cash dividend. Notably, during fiscal 2016, the company returned 80% of net income (excluding amortization of intangible assets) through dividends and share repurchases and targets 40% for fiscal 2017. Such capital deployment activities are anticipated to boost investors’ confidence.

Superior Return on Equity (ROE): TD Ameritrade’s ROE of 16.5%, as compared with the industry average of 9.4%, reflects the company’s commendable position over its peers.

Share Price Movement: TD Ameritrade’s shares have gained 28.1% year to date, compared with the 24.6% growth in the Zacks categorized Investment Bank.

Bottom Line

Organic growth, cross-selling opportunities, solid trading volumes and steady capital deployment activities continue to support TD Ameritrade’s growth prospects. Also, the recent interest rate hike and growing net new client assets are estimated to serve as key strengths that will support earnings stability, going forward.

Stocks to Consider

E*TRADE Financial Corporation has been witnessing upward estimate revisions for the last 30 days. Further, the stock has climbed over 19% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Charles Schwab Corporation (SCHW Quick QuoteSCHW - Free Report) has been recording upward estimate revisions for the last 30 days. In addition, the company’s shares have risen nearly 22.4% so far, this year. It currently sports a Zacks Rank #1.

LPL Financial Holdings Inc. (LPLA Quick QuoteLPLA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 63%. It carries a Zacks Rank #2.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>