Does Charles Schwab Corp (SCHW) Offer Investors Safety?

Charles Schwab Corp (NYSE:SCHW) has been a standout name in the investment brokerage industry for decades. Investors have liked the company because of its fiscal responsibility and quality management. Has Charles Schwab Corp (NYSE:SCHW) done enough to maintain this reputation? Is there a better option in the space?

Important numbers

Charles Schwab has consistently improved revenue over the past three years. Revenue also increased 8.50% last quarter on a year over year basis. However, earnings have been inconsistent.

The good news is that Charles Schwab Corp (NYSE:SCHW) is consistently profitable. Over the past five years, diluted EPS ranged between $0.38 and $1.05.  Investors liked the 5.60% year over year earnings increase last quarter, which helped drive the stock price higher.

Have good numbers led to Charles Schwab outperforming peers E TRADE Financial Corporation (NASDAQ:ETFC) and TD Ameritrade Holding Corp. (NYSE:AMTD) so far this year?

SCHW data by YCharts

For the most part, the industry has traded together, but it’s always nice to see when your investment comes in first place. An added bonus is the 1.10% yield. That said, TD Ameritrade Holding Corp. (NYSE:AMTD) currently yields 1.50% in dividends. Unfortunately, E TRADE Financial Corporation (NASDAQ:ETFC) doesn’t offer any yield. However, you shouldn’t knock E*TRADE for this. It has too much debt to offer such a luxury.

Charles Schwab Corp (NYSE:SCHW), on the other hand, has a very strong cash position, which increases the likelihood of more capital being returned to shareholders in the future.

Below are the debt-to-equity ratios for each company:

Schwab: 0.17

E*TRADE: 1.57

TD AMERITRADE 0.28

Charles Schwab Corp (NYSE:SCHW) and TD Ameritrade Holding Corp. (NYSE:AMTD) have excellent debt management, while E*TRADE has been working to improve in this area for many years.

What about valuation and profit margin?

SCHW Forward PE Ratio data by YCharts

By this point, it should be evident that E TRADE Financial Corporation (NASDAQ:ETFC) is the riskiest investment. There would be little sense investing in a company that has similar valuation to peers while having debt issues and a negative profit margin.

The irony here is that the short position on Ameritrade (11.10%) is higher than the short position on E*TRADE (6.40%). For the record, Charles Schwab has a short position of 4.20%.

Company positives and negatives

Charles Schwab Corp (NYSE:SCHW)’s impressed last quarter, but this should come as no surprise to those who are familiar with the the company; it has a history of beating expectations. And companies with that kind of history tend to keep the trend going.