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Why E*TRADE (ETFC) Stock is an Attractive Pick Right Now

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With online innovations and the company’s renewed focus on strengthening its brokerage business, with the target of achieving 2–3% incremental growth, E*TRADE Financial Corporation appears a solid bet now. The company’s strong trading volumes, client focus, restructuring measures and balance-sheet growth 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. Therefore, E*TRADE is a right choice now, which continues to depict robust fundamentals and improving prospects.

Further, E*TRADE shares have gained 16.7% year to date compared with the 23.3% growth in the Zacks categorized Investment Bank industry.



Why is E*TRADE 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 enable the brokerage 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 set to benefit from the recent rate hike.

Strong Organic Growth: E*TRADE, with the introduction of brokerage products and services, and enhancement of capabilities on professional trading and mobile platforms, remains focused on improving its technology space, in a bid to offer a better digital experience to customers. Notably, in an effort to boost its derivatives platform, E*TRADE completed the acquisition of online options broker – OptionsHouse – in Sep 2016. The company is focused on derivatives mix, with a target of increasing it to 35% of DARTs and also set managed account assets under management (AUM) 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.

Additionally, the company’s projected sales growth (F1/F0) of 8.4%, as against the nil industry average, indicates consistent upward momentum in revenues.

Strong Leverage: E*TRADE’s debt/equity ratio is valued at 0.24 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: E*TRADE currently sports a Zacks Rank #1 (Strong Buy). The bullish rank is driven by upward earnings estimate revisions for the last 30 days. For 2016, the Zacks Consensus Estimate inched up 1.7% to $1.83; while for 2017, it increased 5.6% to $1.87.

Stocks to Consider

TD Ameritrade Holding Corporation (AMTD - Free Report) has been witnessing upward estimate revisions for the last 30 days. Further, the stock has jumped over 25.4% so far, this year. It currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Charles Schwab Corporation (SCHW - Free Report) has been recording upward estimate revisions for the last 30 days. In addition, the company’s shares have risen nearly 20.2% so far, this year. The stock currently carries a Zacks Rank #2 (Buy).

LPL Financial Holdings Inc. (LPLA - 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 56.1%. It holds a Zacks Rank #2.

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