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Anatomy of Success: E-Trade Financial (ETFC)

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Those who have followed the Zacks Rank understand its strengths in finding strong stocks at any given moment. The model emphasizes earnings estimates and estimate revisions, discovering companies of all shapes and sizes that are displaying the characteristics we look for in a market-beating stock.

When a company earns the coveted Zacks Rank #1 (Strong Buy), it is displaying the right characteristics to outperform the market over the next one to three months. But of course, reaching this ideal rank is not an easy feat. Of the thousands of companies tracked by Zacks, only about 5% earn this designation.

Below, you will read about one specific company that helped prove the strength of the Zacks Rank. If investors had followed our model when it spotted this online financial services giant, they would have achieved massive profits.

E-Trade Financial (ETFC - Free Report)

E-Trade has been a leader in the online brokerage industry since the 1990s. After years of steady gains and low volatility, the stock market finally hit some turbulence in recent months amid trade woes and rising Treasury yields. Luckily, this activity has increased buying and selling, which benefits brokers like E-Trade.

This has helped ETFC become a fixture of the Zacks Rank #1 (Strong Buy) list over the past several months, with the stock first earning the designation in this recent run on July 21, 2017. ETFC was lifted to a #1 (Strong Buy) shortly after the company reported earnings. The firm posted better-than-expected EPS and revenue results, notching growth of 8.3% and 21.7%, respectively, in these categories.

E-Trade’s solid report inspired positive analyst sentiment and kept the stock between a #1 (Strong Buy) and a #2 (Buy) for nine weeks. The stock finished the year without dipping below a #3 (Hold) and eventually earned another #1 (Strong Buy) on Jan. 5, 2018. ETFC started the New Year hot and held this top position for nine consecutive weeks.

This strong bullishness paid off, and E-Trade reported another great quarter in late April. The online broker posted earnings of 88 cents per share, beating the Zacks Consensus Estimate by nine cents and improving more than 83 year over year. E-Trade also notched quarterly revenue of $708 million, crushing our consensus estimate of $690 million and surging 28% from the year-ago period.

ETFC was once again added to the #1 (Strong Buy) list in the wake of this solid earnings report and currently holds this great rank now.

The below chart demonstrates the price performance for ETFC and 12-month forward looking EPS estimate (in red), starting from the time the stock first earned a Zacks Rank #1 (Strong Buy).

As we can see, ETFC was a huge winner for those that followed the Zacks Rank. The stock is currently up more than 56.3% since earning a Zacks Rank #1 (Strong Buy) last year. Investors should know that our model is the simplest way to identify elite stocks poised to beat the market on a consistent basis.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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