Let’s talk about the popular E*TRADE Financial Corporation (NASDAQ:ETFC). The company’s shares saw a decent share price growth in the teens level on the NasdaqGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on E*TRADE Financial’s outlook and valuation to see if the opportunity still exists. View out our latest analysis for E*TRADE Financial
Is E*TRADE Financial still cheap?E*TRADE Financial appears to be overvalued according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 24x is currently well-above the industry average of 15.9x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that E*TRADE Financial’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will E*TRADE Financial generate?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. E*TRADE Financial’s earnings over the next few years are expected to increase by 70.79%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ETFC’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ETFC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ETFC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ETFC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on E*TRADE Financial. You can find everything you need to know about E*TRADE Financial in the latest infographic research report. If you are no longer interested in E*TRADE Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.