SCHW Stock Analysis

By: EBS Invests

Overview:

Charles Schwab Corporation (SCHW) provides brokerage, retirement, banking solutions, loans, and wealth management. Additionally, the firm also provides custody services and financial advisor networks across the United States. Schwab is primarily known for its brokerage and retirement products. Also, Charles Schwab has the highest-rated customer service in the industry, according to JD Power. Additionally, Schwab recently acquired up TD Ameritrade, bolstering its brokerage services and adding to its client base.

Over the past five years, SCHW has had a rate of return (RoR) of 6.35%, lagging the S&P 500's five-year performance of 46%. However, although SCHW has lacked the S&P in performance, the stock has some of the best-growing financials and dividends of any stock we’ve looked at thus far. Additionally, Schwab plans to grow their revenue at a compounded annual growth rate (CAGR) of 12% over the next 3 years. The firm also plans to grow its earnings per share (EPS) by 25% in the next two years. This is what investors should be looking for.

Financials and dividend information:

SCHW has a past 5-year revenue CAGR of 9.6% and a 3-year CAGR of 16.9%. The revenue per employee for the company is $588,000, which is outstanding. The company has grown its dividend CAGR to 21.25% with a low payout ratio of 29.15%. Schwab currently offers a yield (Y) of 1.81%, which is very good for a fast-compounding dividend growth stock.

Valuation: 

Charles Schwab Corporation has a nice price earnings (PE) of 16, which offers a nice PE for the company. Schwab plans to grow by 12% over the next three years. Applying their earnings per share (EPS) of $3.50 and a more conservative growth rate of 8%, which I believe is very reasonable when the market does fully recover. **I get an intrinsic value estimate of $74.67 with a max buy price of $59 and a 20% margin of safety (MOS). SCHW is currently trading for around $55 at the end of September.

Conclusion:

SCHW is a growing company that offers the fundamentals many investors seek. These include their great revenue growth, dividend growth, and future plans for growing their revenue. Additionally, SCHW is a very diverse firm, as they operate in many sectors of the financial world. Such as brokerage, retirement, banking, financial advisor networks, and loan products. When looking for stocks, we should be able to believe that the business that we’re investing in should perform or outperform our standards. Schwab seems to fit that bill. Although their stock price has lagged behind the S&P 500, it still might be able to outshine the master.

Market Commentary Regarding AXP & IBM

American Express Company (AXP): AXP has struck a new recent low of $149 a share at market close on Friday. The stock has hit a tumble and is down over 8% over the past 6 months, as fears of credit card debt keep building and concerns over consumer spending habits grow. However, AXP reported record revenue in Q2, growing 14% year over year (YoY). I have an intrinsic value of $205 on this stock, with a buy price anytime it falls below $165. I plan on adding to this position soon.

International Business Machines (IBM): IBM has a longed-for and storied past of lackluster performance. However, new management has turned the battleship around, and IBM is on a positive trend. After hitting a recent high of $151.90, the stock has fallen 7.4% to $140 a share. This is a stock to keep an eye on, as they offer a 4.7% dividend, and slow but steady growth. I plan on adding to IBM at any time it falls below $130 a share.

*If you want to learn more about either of these stocks, read "July Special Edition” on the past editions site located on my website. Additionally, I have videos of analysis on both. I will link both below.

Stock purchases and dividends, July 16th-Aug 31:

Purchases: 

• SCHD 1x share

• TGT $14

• ALB $14

• UNH $8

• AAPL $8

Dividends:

• IBM - $35.78

• SWVXX - $22.07

• SCHD - $7.34

• TROW - $5.31

• SCHX - $4.11

• QCOM - $2.41

• TGT - $1.89

• RIO - $1.83

• JNJ - $1.71

• MSFT - $1.17

• CNI - $1.16

• SCHG - $0.75

• UNH - $0.67

  Total in period (8/31-9/31): $86.20

  YTD Total: $289.68

Want to Read Past Editions? Click Below:

Video resources are available here:

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//See you in the next edition

EBS Invests 2023//

NOT A FINANCIAL ADVISOR.

**The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our site constitutes a solicitation, recommendation, endorsement, or offer by EBS Invests (Investments) or any third party provided to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such an offer would be unlawful under the securities laws or such jurisdiction.

There are risks associated with investing in securities. Investing in stocks, bonds, ETFs, mutual funds all involve a risk of loss. **