Rating Change #7
Charles Schwab Corp (SCHW) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.
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Highlights from the ratings report include:
- SCHW's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Despite the weak revenue results, SCHW has outperformed against the industry average of 22.9%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- SCHWAB (CHARLES) CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SCHWAB (CHARLES) CORP increased its bottom line by earning $0.71 versus $0.37 in the prior year. For the next year, the market is expecting a contraction of 6.3% in earnings ($0.67 versus $0.71).
- The gross profit margin for SCHWAB (CHARLES) CORP is currently lower than what is desirable, coming in at 31.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 15.90% trails that of the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SCHW has underperformed the S&P 500 Index, declining 20.94% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
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