For a company that specializes in cheap trades, Charles Schwab ( SCHW) shares are expensive.

Schwab's stock has climbed 13% this year, while the Russell 1000 Financial Services Index remains flat. The shares, which have rebounded to $18 after hitting $11.36 in March, are trading at 23 times the amount it's expected to earn this year, compared with 17 times for its rivals.

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Schwab beat analysts' first-quarter earnings estimates, lifting investors' hopes even as its net income fell 29%. The San Francisco-based company has been trimming fees to maintain its lead in a fiercely competitive industry. Meeting shareholders' profit expectations for the next 18 months won't be easy.

Schwab shares are trading at 18 times next year's projected net income, compared with 15 times for its peers. Its price-to-book value stands at 4.7, topping the 2.5 industry average. TD Ameritrade Holding ( AMDT), optionsXpress Holdings ( OXPS), E*Trade Financial ( ETFC) and TradeStation Group ( TRAD) offer more attractive prices.

Rational explanations exist for Schwab's hefty valuation. Its earnings per share are forecast to grow 28% next year, 10 percentage points higher than those of its average competitor. Only optionsXpress, whose earnings are projected to expand 29% in 2010, is expected to outgrow Schwab next year.

Schwab has been trying to lure new clients by cutting mutual fund fees to offset shrinking client assets, but so have its peers. Many investors view online trading as a commodity, and choose the broker that charges the lowest commissions.

Schwab's basic online rate is $12.95 per trade. Active traders with accounts bigger than $1 million pay $8.95. Other firms have been dangling fees as low as $7 a trade. TradeStation charges a penny a share, or $5 for 500 shares, for some transactions.

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