Is Schwab Poised for More Growth After Announcing Record Quarterly Earnings This Year?

Thinking about what to do with your Charles Schwab shares, or maybe eyeing them for your portfolio? You’re not alone. This stock has been a magnet for investor interest lately, and for good reason. Even with some short-term hiccups, like a dip of 1.5% over the last month, Schwab is still flexing impressive strength: it’s up 29.3% year to date and a whopping 50.1% over the past year. Zoom out a little further, and the five-year return sits at a stellar 170.8%. That kind of climb can make anyone pause and wonder if the best gains are already in the rearview, or if there’s still runway ahead.

It’s not all smooth sailing, of course. Shifts in interest rates and evolving investor trends have had outsized effects on financial services stocks, reshaping risk perceptions throughout the sector. For Schwab, this means recent moves reflect both renewed market optimism and careful recalibration as conditions change. Many investors are asking themselves: is Schwab still trading at a bargain or are we entering pricier territory?

To answer that, let’s talk numbers. On a value score out of 6, where 1 is added for each undervalued check, Schwab clocks in at 2. This means it’s undervalued on two out of six key metrics, suggesting it’s not the ultimate steal, but there may still be opportunities for smart investors. Up next, we’ll dig into these valuation methods to figure out exactly where Schwab stands today. And stay tuned, there’s an even sharper way to judge value that we’ll unpack at the end.

Charles Schwab scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Charles Schwab Excess Returns Analysis

The Excess Returns model focuses on how effectively a company turns shareholder equity into profits above its cost of capital. This method looks beyond traditional earnings and evaluates the returns Schwab generates on invested capital, adjusted for its cost of equity. It is a powerful approach for financial stocks like Schwab, as it captures the value created through high and sustainable return on equity.

For Charles Schwab, several key numbers stand out:

• Book Value: $23.53 per share
• Stable EPS: $5.42 per share
  (Source: Weighted future Return on Equity estimates from 7 analysts.)
• Cost of Equity: $2.53 per share
• Excess Return: $2.89 per share
• Average Return on Equity: 19.05%
• Stable Book Value: $28.45 per share
  (Source: Weighted future Book Value estimates from 4 analysts.)

By integrating these inputs, the Excess Returns model estimates Schwab’s intrinsic value at $78.29 per share. At present, this valuation suggests that Schwab stock is roughly 21.9% overvalued compared to its current market price. While the company’s long-term profitability is attractive, investors may be paying a premium for that historic outperformance.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Charles Schwab.

Our Excess Returns analysis suggests Charles Schwab may be overvalued by 21.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Charles Schwab Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most widely used yardsticks for valuing profitable companies like Charles Schwab. It offers a quick way to compare how much investors are paying for each dollar of earnings, making it especially relevant when evaluating established firms with steady income streams.

Typically, a company’s PE ratio will be shaped by expectations of future growth and the level of risk. Higher growth prospects or lower perceived risks usually warrant a higher PE multiple, while slower growth and increased uncertainty can pull that number down. For Schwab, the current PE ratio comes in at 25x. This sits below both the average for its industry, Capital Markets, which is at 27.2x, and its direct peer group, which averages a higher 32.8x. In comparison, Schwab appears to be reasonably priced against these yardsticks.

To get beyond simple comparisons, Simply Wall St computes a proprietary metric called the “Fair Ratio.” This number goes deeper than industry or peer averages by factoring in Schwab’s earnings growth, profit margins, market capitalization, and specific business risks to home in on a truly tailored benchmark. For Schwab, the Fair Ratio is 20.3x, just a bit below the current market multiple. Since the difference here is less than 0.10, it suggests that the market’s pricing of Schwab is essentially in line with the fundamentals rather than being particularly high or low.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Charles Schwab Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personalized investment story. It connects your perspective on a company’s future (your expectations for revenue, earnings, margins, and fair value) directly to the numbers, offering context behind the data that traditional metrics might miss.

Unlike static ratios or consensus targets, Narratives help you bridge the gap between what a company is doing and how that should be reflected in its valuation. You can create, adjust, and share your Narrative right on Simply Wall St’s Community page, used by millions of investors, making it easy to turn your own research or conviction into a structured forecast.

By comparing your Narrative-driven Fair Value to the current market Price, you can quickly see if now is the right time to buy or sell, tailored to your scenario. Narratives are continuously updated as new news or earnings are released, ensuring your view is always based on the freshest information.

For example, while some see Charles Schwab’s future fair value as high as $131 based on bullish growth and margin assumptions, others are more cautious, setting it as low as $84 if competition and rising costs become major headwinds. Which Narrative fits your view?

Do you think there's more to the story for Charles Schwab? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com