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Charles Schwab Corp Stock Buy Recommendation Reiterated (SCHW)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK (TheStreet) -- Charles Schwab (NYSE:SCHW) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • SCHW's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 8.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 35.39% is the gross profit margin for SCHWAB (CHARLES) CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.79% is above that of the industry average.
  • Compared to its closing price of one year ago, SCHW's share price has jumped by 65.07%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • SCHWAB (CHARLES) CORP's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SCHWAB (CHARLES) CORP reported lower earnings of $0.69 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($0.73 versus $0.69).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, SCHWAB (CHARLES) CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

The Charles Schwab Corporation, through its subsidiaries, provides securities brokerage, banking, money management, and financial advisory services to individuals and institutional clients. The company operates through two segments, Investor Services and Institutional Services. Charles Schwab has a market cap of $27.5 billion and is part of the financial sector and financial services industry. Shares are up 51% year to date as of the close of trading on Friday.

You can view the full Charles Schwab Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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