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5 Reasons That Make Schwab (SCHW) Stock Worth Betting on Now

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Despite the continued concerns related to the pandemic and low rates, it seems to be a wise idea to add Charles Schwab (SCHW - Free Report) stock to your portfolio now. The brokerage firm boasts solid fundamental and prospects. Further, the company is growing through opportunistic buyouts.

Also, the stock has been witnessing upward earnings estimate revisions of late, reflecting analysts’ optimism regarding its earnings growth potential. The Zacks Consensus Estimate for its current-year earnings has been revised 1.7% upward over the past 30 days, while that for the next year has been raised 7.2%. It currently carries a Zacks Rank #2 (Buy).

Also, shares of the company have surged 56.9% over the past six months, outperforming the industry’s rally of 40.2%.



Here are few key factors that make Schwab stock an attractive pick now.

Earnings Growth: Schwab witnessed earnings growth of 25.5% in the past three to five years, higher than the industry average of 17%. While its earnings are projected to decline 13.2% for 2020, the trend is likely to reverse after that. For 2021, earnings are expected to grow 7.7%.

Revenue Strength: Schwab’s revenues witnessed a compounded annual growth rate (CAGR) of 14% over the last five years (2015-2019). These were mainly driven by the company’s efforts to enhance trading revenues and rise in advice solution revenues. The uptrend in revenues is expected to continue in the near term as reflected by the company’s projected sales growth rate of 5% for the current year and 29% for 2021.

Opportunistic Acquisitions: Over the past year, Schwab has been on an acquisition spree. The buyouts of TD Ameritrade, USAA’s Investment Management Company, Wasmer, Schroeder & Company, LLC and the acquisition of Motif’s technology and intellectual property are likely to further strengthen the company’s position in the brokerage industry and help diversify revenues. Driven by strong liquidity position, Schwab is well poised to expand through inorganic initiatives.

Steady Capital Deployments: Schwab remains focused on maintaining a low-cost capital structure, which has been able to support its capital deployments. In January 2020, the company announced a 6% increase in quarterly dividend, following a hike in 2019 and twice in 2018. Considering last day’s closing price of $52.94 per share, the company's dividend yield currently stands at 1.4%.

Further, Schwab has a share repurchase program in place. As of Sep 30, 2020, $1.8 billion shares were remaining under the buyback authorization.

Superior ROE: Schwab's trailing 12-month return on equity (ROE) reflects its superiority in terms of utilizing shareholders’ funds. The company’s ROE of 13.52% compares favorably with 12.33% for the industry.

Other Stocks Worth a Look

Piper Sandler Companies (PIPR - Free Report) witnessed an upward earnings estimate revision of 12.6% for 2020 over the past 30 days. Its shares have surged 71.3% over the past six months. At present, it sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for Evercore Inc (EVR - Free Report) have moved 8.3% upward for 2020 over the past month. Its shares have jumped 89.3% over the past six months. At present, it carries a Zacks Rank of 2.

Tradeweb Markets Inc. (TW - Free Report) has recorded a marginal upward earnings estimate revision for 2020 in the past 30 days. This Zacks Rank #2 stock has rallied 7.5% over the past six months.

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