E*TRADE Financial Corporation (ETFC - Free Report) appears a solid bet now, backed by online innovations, launch of products and services, as well as the company’s renewed focus on strengthening its brokerage business.
The factors that might drive the stock higher include encouraging organic growth, strong fundamentals and robust trading volumes. Moreover, the rising interest rate environment and lower tax rates are likely to further support bottom-line growth.
Also, the company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 7.7%.
Further, it has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 9% upward, over the last 30 days. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).
Additionally, E*TRADE’s shares have gained 92.2% over the past year, outperforming the industry's rally of 39%.
Why E*TRADE is an Attractive Pick
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 providing better digital experience to customers. Further, as the company currently derives nearly 60% of total net revenues from net interest income, it is set to benefit from the rising interest rates.
Furthermore, its projected sales growth (F1/F0) rate of 22.2% compared with 4.6% industry’s average, indicates consistent upward momentum in revenues.
Earnings Strength: E*TRADE has recorded an earnings growth rate of 30.3% over the last three to five years compared with 10.5% for the industry it belongs to.
Further, this earnings momentum is likely to continue in the long term (three to five years) as reflected by the company’s projected earnings per share growth rate of 16.62% compared with 14.6% for the industry.
Superior Return on Equity: E*TRADE has a return on equity of 11.64% compared with the industry average of 11.10%. This indicates that the company is efficient in utilizing shareholder funds.
Improving Credit Quality: The company’s credit quality has improved significantly over the years. In 2017, non-performing assets declined nearly 57.5% from the 2013 level. Also, the ratio of net-charge-offs (recoveries) to average loans came in at (0.7)% compared with 1.8% in 2013.
Favorable VGM Score: E*TRADE has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Other Stocks to Consider
Morgan Stanley (MS - Free Report) has witnessed a 4.2% upward estimate revision in the last 30 days. In a year’s time, the company’s share price has gained more than 25%. It carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Interactive Brokers Group (IBKR - Free Report) sports a Zacks Rank of 1. Its earnings estimates for 2018 have been revised nearly 5% upward over the last 30 days. Also, its shares have gained more than 120% in the past year.
The Goldman Sachs Group (GS - Free Report) flaunts a Zacks Rank #1. The Zacks Consensus Estimate for the company has jumped 6.6% for the current year, in the last 30 days. Its share price has gained more than 10% over the past year.
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