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Schwab (SCHW) Surges 23.5% YTD: Will the Rally Continue?
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Shares of Charles Schwab Corp. (SCHW - Free Report) have appreciated 23.5% so far this year. Though the stock has underperformed the industry’s rally of 26.2%, it has gained considerably compared with the S&P 500’s growth of 6.1% in the same time frame.
The impressive year-to-date price performance marks a significant improvement from last year’s performance. In 2020, the company’s shares had witnessed a rise of 11.5%.
Despite low interest rate environment and mounting expenses, Schwab’s performance has been driven by its opportunistic acquisitions over the past year and initiatives to augment trading revenues. Further, favorable macro-economic factors including faster-than-expected economic growth have instilled investor optimism.
In fact, analysts are bullish on the stock, as earnings estimates for this Zacks Rank #3 (Hold) company have been witnessing upward revisions. Over the past 30 days, the Zacks Consensus Estimate for earnings has moved up 1.1% and marginally north for 2021 and 2022, respectively.
Now, let’s take a look at some key factors that are likely to provide further boost to Schwab’s stock.
Growth Initiatives: Acquisitions of TD Ameritrade, USAA’s Investment Management Company and Wasmer, Schroeder & Company, LLC, and the buyout of Motif’s technology and intellectual property over the past year have strengthened Schwab’s position in the brokerage industry. These deals are expected to be accretive to earnings in the upcoming quarters and help diversify revenues. These efforts have resulted in improvement in the company’s total client assets balance, which witnessed a CAGR of 25.8% over the last four years (ended 2020).
Further, several initiatives including commission free-trading, reducing fees for the Schwab market cap-weighted index mutual funds and launch of Schwab Stock Slices are expected to continue contributing to the company's market share.
Solid Balance Sheet: Schwab maintains a solid balance sheet position. As of Dec 31, 2020, the company had cash and cash equivalents of $40.3 billion, and total debt of $13.6 billion. Further, its times interest earned and total debt/total capital ratios have improved at 2020-end. Also, its debt-to-equity ratio compares favorably with that of the industry.
Earnings Strength: The company’s earnings have witnessed growth of 22.7% in the past three-five years. The upward momentum is anticipated to sustain in the near term. In 2021 and 2022, earnings are projected to grow 17.6% and 7.3% respectively.
Favorable Zacks Industry Rank: Schwab is part of that Zacks industry, which currently carries a Zacks Industry Rank #5 (placing it at the top 2% of more than 250 Zacks industries).
The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Key Industry Picks
Some better-ranked stocks from the same space worth a look are mentioned below.
Cowen Group Inc has witnessed an upward earnings estimate revision of 47% for 2021 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has soared 120.5% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evercore Inc.’s (EVR - Free Report) current-year earnings estimates rose 12.5% in 60 days’ time. Further, the company’s shares have jumped 112.1% over the six months. At present, it flaunts a Zacks Rank #1.
Greenhill & Co.,Inc‘s current-year earnings estimates rose 18.2% in 60 days’ time. Further, the company’s shares have appreciated 43.1% over the six months. At present, it sports a Zacks Rank #1.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Image: Bigstock
Schwab (SCHW) Surges 23.5% YTD: Will the Rally Continue?
Shares of Charles Schwab Corp. (SCHW - Free Report) have appreciated 23.5% so far this year. Though the stock has underperformed the industry’s rally of 26.2%, it has gained considerably compared with the S&P 500’s growth of 6.1% in the same time frame.
The impressive year-to-date price performance marks a significant improvement from last year’s performance. In 2020, the company’s shares had witnessed a rise of 11.5%.
Despite low interest rate environment and mounting expenses, Schwab’s performance has been driven by its opportunistic acquisitions over the past year and initiatives to augment trading revenues. Further, favorable macro-economic factors including faster-than-expected economic growth have instilled investor optimism.
In fact, analysts are bullish on the stock, as earnings estimates for this Zacks Rank #3 (Hold) company have been witnessing upward revisions. Over the past 30 days, the Zacks Consensus Estimate for earnings has moved up 1.1% and marginally north for 2021 and 2022, respectively.
Now, let’s take a look at some key factors that are likely to provide further boost to Schwab’s stock.
Growth Initiatives: Acquisitions of TD Ameritrade, USAA’s Investment Management Company and Wasmer, Schroeder & Company, LLC, and the buyout of Motif’s technology and intellectual property over the past year have strengthened Schwab’s position in the brokerage industry. These deals are expected to be accretive to earnings in the upcoming quarters and help diversify revenues. These efforts have resulted in improvement in the company’s total client assets balance, which witnessed a CAGR of 25.8% over the last four years (ended 2020).
Further, several initiatives including commission free-trading, reducing fees for the Schwab market cap-weighted index mutual funds and launch of Schwab Stock Slices are expected to continue contributing to the company's market share.
Solid Balance Sheet: Schwab maintains a solid balance sheet position. As of Dec 31, 2020, the company had cash and cash equivalents of $40.3 billion, and total debt of $13.6 billion. Further, its times interest earned and total debt/total capital ratios have improved at 2020-end. Also, its debt-to-equity ratio compares favorably with that of the industry.
Earnings Strength: The company’s earnings have witnessed growth of 22.7% in the past three-five years. The upward momentum is anticipated to sustain in the near term. In 2021 and 2022, earnings are projected to grow 17.6% and 7.3% respectively.
Favorable Zacks Industry Rank: Schwab is part of that Zacks industry, which currently carries a Zacks Industry Rank #5 (placing it at the top 2% of more than 250 Zacks industries).
The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Key Industry Picks
Some better-ranked stocks from the same space worth a look are mentioned below.
Cowen Group Inc has witnessed an upward earnings estimate revision of 47% for 2021 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has soared 120.5% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evercore Inc.’s (EVR - Free Report) current-year earnings estimates rose 12.5% in 60 days’ time. Further, the company’s shares have jumped 112.1% over the six months. At present, it flaunts a Zacks Rank #1.
Greenhill & Co.,Inc‘s current-year earnings estimates rose 18.2% in 60 days’ time. Further, the company’s shares have appreciated 43.1% over the six months. At present, it sports a Zacks Rank #1.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>