The firm says that despite the company's recent turnaround driven by improving capital ratios and and the ongoing divestment of its legacy mortgage portfolio, the company is "still not out of the woods."
"Sustainable organic growth in an increasingly competitive market will prove challenging in our view. While exposed to higher interest rates, given the legacy funding and asset mix, ETFC is not as well positioned as its peer," said the firm.
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E*Trade shares are up slightly, 0.2% to $21.72, in early trading today.
Separately, 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 some important positives, 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, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 ($1.02 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 176.2% when compared to the same quarter one year prior, rising from $35.12 million to $97.00 million.
- 49.72% is the gross profit margin for E TRADE FINANCIAL CORP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 18.26% is above that of the industry average.
- Powered by its strong earnings growth of 175.00% and other important driving factors, this stock has surged by 58.38% 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