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5 Reasons to Add E*TRADE (ETFC) Stock to Your Portfolio Now

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E*TRADE 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, with the target of achieving 2-3% incremental growth. The company’s strong trading volumes, client focus, restructuring measures and balance-sheet growth are anticipated to yield positive results for the stock.

Additionally, E*TRADE’s shares have gained around 5%, over the last three months, compared with around 7% growth registered by the industry.

Further, it has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 1.2% upward, over the last 60 days. As a result, the stock currently carries a Zacks Rank #2 (Buy).



Why E*TRADE is an Attractive Pick

Benefit from Rate Hike: With a rise in rates, brokerage firms are expected to engage in more investment activities. As brokerage firms earn interest income on un-invested cash in customer accounts, this rate hike will enable the firms to invest at higher rates. As E*TRADE currently derives nearly 60% of its net revenues from net interest income, the company is set to benefit from the rate hike.

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 improving its technology space, in a bid to offer a better digital experience to customers. The company is focused on derivatives mix, with a target of increasing it to 35% of DARTs and also set managed account assets under management (AUM) target of $6 billion, within the next two years. It aims to achieve 2-3% improvement in its rate of annual organic growth, across accounts, assets and trades.

Furthermore, the company’s projected sales growth (F1/F0) of 5.95%, as against the nil industry average, indicates continued upward momentum in revenues.

Earnings Strength: E*TRADE witnessed earnings growth of 33.99% over the last three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 10.69% promises rewards for investors, over the long run. Also, the company recorded average positive earnings surprise of 9.89% in the trailing four quarters.

Strong Leverage: E*TRADE’s debt/equity ratio is valued at 0.24 compared to the industry average of 0.38, indicating relative lower debt burden. It highlights the financial stability of the company despite an unstable economic environment.

Superior Return on Equity: E*TRADE has a return on equity of 17.27% compared with the industry average of 14.35%. This indicates that the company is efficient in utilizing shareholder funds.

Stocks to Consider

Webster Financial Corporation (WBS - Free Report) has been witnessing upward estimate revisions for the past 60 days. Further, the stock has appreciated more than 5% in the past three months. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the past 60 days, with the company’s shares rising nearly 10.6%, in three months’ time. It holds a Zacks Rank of 2, at present.

Citizens Financial Group, Inc. (CFG - Free Report) has been witnessing upward estimate revisions for the past 90 days. Over the past three months, this Zacks #2 Ranked company’s shares have been up more than 8%.

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