Why E*TRADE Financial (ETFC) and TD Ameritrade (AMTD) Shares Are Falling Today

NEW YORK (TheStreet) -- E*TRADE Financial (ETFC) and TD Ameritrade (AMTD) were falling Thursday was falling 5.1% to $22.50 after competitor Charles Schwab (SCHW) posted a statement on its website condemning high-frequency trading.

E*TRADE was walling 5.1% to $22.50, shares of TD Ameritrade were falling 3.2% to $32.69. Shares of Charles Schwab were falling 0.5% to $27.76.

The statement calls high-frequency trading a "growing cancer that needs to be addressed."

"Schwab serves millions of investors and has been observing the development of high-frequency trading practices over the last few years with great concern," the statement reads. "As we noted in an opinion piece in the Wall Street Journal last summer, high-frequency trading has run amok and is corrupting our capital market system by creating an unleveled playing field for individual investors and driving the wrong incentives for our commodity and equities exchanges. The primary principle behind our markets has always been that no one should carry an unfair advantage. That simple but fundamental principle is being broken."

Charles Schwab mentions the new book Flash Boys by Michael Lewis, saying that it shows "the high-frequency trading cancer is deep." The company also mentioned New York Attorney General Eric Schneiderman's intention to "continue to shine a light on unseemly practices in the markets."

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TheStreet Ratings team rates E TRADE FINANCIAL CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate E TRADE FINANCIAL CORP (ETFC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • E TRADE FINANCIAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, E TRADE FINANCIAL CORP turned its bottom line around by earning $0.29 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.29).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 131.1% when compared to the same quarter one year prior, rising from -$186.06 million to $57.86 million.
  • Net operating cash flow has significantly increased by 144.19% to $228.58 million when compared to the same quarter last year. In addition, E TRADE FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of 93.28%.
  • 44.06% is the gross profit margin for E TRADE FINANCIAL CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.41% trails the industry average.
  • Powered by its strong earnings growth of 130.76% and other important driving factors, this stock has surged by 114.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: ETFC Ratings Report

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STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings team rates TD AMERITRADE HOLDING CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TD AMERITRADE HOLDING CORP (AMTD) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market, TD AMERITRADE HOLDING CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • TD AMERITRADE HOLDING CORP has improved earnings per share by 29.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TD AMERITRADE HOLDING CORP increased its bottom line by earning $1.22 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.22).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 30.6% when compared to the same quarter one year prior, rising from $147.00 million to $192.00 million.
  • 47.01% is the gross profit margin for TD AMERITRADE HOLDING 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 25.49% is above that of the industry average.
  • You can view the full analysis from the report here: AMTD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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