For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on E*TRADE Financial Corporation (NASDAQ:ETFC) useful as an attempt to give more color around how E*TRADE Financial is currently performing. Check out our latest analysis for E*TRADE Financial
Did ETFC beat its long-term earnings growth trend and its industry?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to examine various companies on a more comparable basis, using new information. For E*TRADE Financial, its latest trailing-twelve-month earnings is $587.0M, which compared to the previous year’s figure, has moved up by 14.20%. Given that these values are fairly nearsighted, I have created an annualized five-year figure for ETFC’s earnings, which stands at $217.4M. This means that, on average, E*TRADE Financial has been able to steadily improve its profits over the last few years as well.What’s the driver of this growth? Well, let’s take a look at whether it is solely due to industry tailwinds, or if E*TRADE Financial has seen some company-specific growth. Over the last few years, E*TRADE Financial increased its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 17.00% over the past year, and 10.45% over the previous five years. This suggests that whatever uplift the industry is profiting from, E*TRADE Financial has not been able to leverage it as much as its average peer.
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. Companies that have performed well in the past, such as E*TRADE Financial gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. 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 30 September 2017. This may not be consistent with full year annual report figures.