TD Ameritrade’s peers include Charles Schwab Corp (NYSE:SCHW), E TRADE Financial Corporation (NASDAQ:ETFC), LPL Financial Holdings Inc (NASDAQ:LPLA), and ING Groep N.V. (NYSE:ING). Charles Schwab is valued at a moderate premium to TD Ameritrade, with a trailing P/E multiple of 23. However, that company did experience revenue and earnings growth- with net income actually up over 20%- last quarter versus a year ago. We would be interested in learning why Charles Schwab is outperforming its peer; if the reasons are sustainable, it might be a “growth at a reasonable price” stock. The flashier E Trade has dipped into the red the past couple of quarters, but Wall Street analysts expect it to recover: the current-year P/E is 20 and the five-year PEG ratio is 0.7 as consensus is for good earnings numbers. We wouldn’t consider E Trade until the company had reported profitability for a quarter or two.
LPL, like TD Ameritrade, has been reporting stable numbers though that stock is also valued at a premium: it trades at 23 times trailing earnings. Expectations are high here as well but we think that we would avoid the stock. ING’s earnings multiples- trailing, and consensus for 2013- are only 6, and the PEG ratio is quite low here as well. This is partly because business has been doing poorly; revenue, for example, fell 24% in its most recent quarterly report compared to the same period in 2011. Still, it is cheap enough at first glance that it might be worth a closer look.
TD Ameritrade and many of its peers don’t appear to be particularly attractive investments. In particular, we would like to see better growth numbers at the earnings multiple the company is currently valued at. Charles Schwab and ING might be worth further research.
Disclosure: I own no shares of any stocks mentioned in this article.