Rating Change #7
Charles Schwab Corp
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.
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.
The Charles Schwab Corporation, through its subsidiaries, provides securities brokerage, banking, and related financial services to individuals and institutional clients. The company has a P/E ratio of 19.5, above the average financial services industry P/E ratio of 19.2 and above the S&P 500 P/E ratio of 17.7. Charles Schwab has a market cap of $16.13 billion and is part of the
industry. Shares are up 11.7% year to date as of the close of trading on Tuesday.
You can view the full
Charles Schwab Ratings Report
or get investment ideas from our
investment research center