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Anatomy of Success: TD Ameritrade (AMTD)

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The proven Zacks Rank is great method for both beginning and experienced investors to identify the strongest stocks to buy. The system emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks—including those with varying market caps and from many different industries—that are displaying the right characteristics to beat the market.

When a particular company earns the desired Zacks Rank #1 (Strong Buy), it is on track to provide remarkable returns over the next one to three months. But achieving this ideal rank is no simple task, and of the thousands of companies tracked by Zacks, only about 5% earn this designation.

In the story below, you will learn about one specific company that helped show the strength of the Zacks Rank. If investors had followed our ranking system when it flagged this popular brokerage firm, they would have witnessed significant profits.

TD Ameritrade (AMTD - Free Report)

TD Ameritrade is a brokerage firm offering an electronic trading platform for the purchase and sale of financial securities. It is a popular online brokerage among individual investors and claims more than 11 million active accounts. In 2017, TD Ameritrade executed more than 500,000 client transactions per day.

AMTD has been a flagged by the Zacks Rank a number of times over the past year. The company earned its first Zacks Rank #2 (Buy) on July 14, 2017—just days ahead of a huge quarterly earnings report. Analysts were clearly getting more bullish on the company’s prospects, and when TD Ameritrade eventually did report, this bullishness was proved correct.

In that quarter, TD Ameritrade surpassed our consensus estimates on the top and bottom line, notching earnings growth of 12.8% and revenue growth of 11.1% in the process. In the following weeks, AMTD would spend time on the #2 (Buy) and #1 (Strong Buy) lists and never dipped below a #3 (Hold). The stock would join the #1 (Strong Buy) list again for an extended stay starting on Oct. 27.

This designation also came on the back of a great quarterly earnings report. This time around, the company crushed estimates again and reported EPS growth of 40% and revenue growth of 19%.

Another moment that investors should note is when AMTD earned a Zacks Rank #1 (Strong Buy) on Jan. 26, 2018. This was the stock’s fourth time earning our top mark within the past year. It was added to the list just a few days after a quarterly earnings report that saw staggering earnings growth of 95% and revenue growth of 47%. As one might have assumed, TD Ameritrade once again crushed estimates on the top and bottom line in this quarter.

The below chart demonstrates the price performance for AMTD and 12-month forward looking EPS estimate (in red), starting from the time the stock first earned a Zacks Rank #2 (Buy).

AMTD was clearly a huge winner for those that followed the Zacks Rank. Shares of the digital brokerage are up about 36% since it was first considered a buy last year. Investors should always remember that the Zacks Rank 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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