Stock Analysis

With EPS Growth And More, Charles Schwab (NYSE:SCHW) Makes An Interesting Case

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NYSE:SCHW
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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Charles Schwab (NYSE:SCHW). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Charles Schwab

How Quickly Is Charles Schwab Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Charles Schwab grew its EPS by 4.7% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Charles Schwab's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Charles Schwab remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to US$19b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:SCHW Earnings and Revenue History September 5th 2022

Fortunately, we've got access to analyst forecasts of Charles Schwab's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Charles Schwab Insiders Aligned With All Shareholders?

Owing to the size of Charles Schwab, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$8.3b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Charles Schwab Deserve A Spot On Your Watchlist?

One important encouraging feature of Charles Schwab is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Still, you should learn about the 1 warning sign we've spotted with Charles Schwab.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

What are the risks and opportunities for Charles Schwab?

The Charles Schwab Corporation, together with its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

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Rewards

  • Trading at 7.6% below our estimate of its fair value

  • Earnings are forecast to grow 15.15% per year

  • Earnings grew by 26.2% over the past year

Risks

  • Significant insider selling over the past 3 months

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Share Price

Market Cap

1Y Return

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About NYSE:SCHW

Charles Schwab

The Charles Schwab Corporation, together with its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth4
Past Performance5
Financial Health3
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Solid track record with reasonable growth potential and pays a dividend.