How Does E*TRADE Financial Corporation’s (NASDAQ:ETFC) Earnings Growth Stack Up Against Industry Performance?

When E*TRADE Financial Corporation (NASDAQ:ETFC) announced its most recent earnings (31 March 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how E*TRADE Financial performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see ETFC has performed. See our latest analysis for E*TRADE Financial

Did ETFC beat its long-term earnings growth trend and its industry?

I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to examine many different companies on a more comparable basis, using new information. For E*TRADE Financial, its latest earnings (trailing twelve month) is US$692.00M, which, against the prior year’s level, has risen by 30.32%. Given that these figures are relatively short-term, I’ve estimated an annualized five-year figure for ETFC’s net income, which stands at US$253.04M This means that, generally, E*TRADE Financial has been able to increasingly grow its earnings over the last couple of years as well.

NasdaqGS:ETFC Income Statement May 25th 18
NasdaqGS:ETFC Income Statement May 25th 18
What’s enabled this growth? Let’s take a look at whether it is only because of an industry uplift, or if E*TRADE Financial has seen some company-specific growth. In the past couple of years, E*TRADE Financial grew its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 14.49% over the prior twelve months, and 12.80% over the past half a decade. This shows that whatever tailwind the industry is enjoying, E*TRADE Financial is capable of amplifying this to its advantage.

What does this mean?

E*TRADE Financial’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While E*TRADE Financial has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research E*TRADE Financial to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ETFC’s future growth? Take a look at our free research report of analyst consensus for ETFC’s outlook.
  2. Financial Health: Is ETFC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.