SCHW

The Charles Schwab Corp.

Finance/Real Estate


Presented:06/17/2020
Price:$36.67
Cap:$47.21B
Current Price:$71.96
Cap:$127.98B

Presented

Date06/17/2020
Price$36.67
Market Cap$47.21B
Ent Value$30.90B
P/E Ratio14.3x
Book Value$18.24
Div Yield1.91%
Shares O/S1,287.41M
Ave Daily Vol11,765,640
Short Int6.37%

Current

Price$71.96
Market Cap$127.98B
The Charles Schwab Corp. is a savings and loan holding company, which engages in the provision of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It operates through the Investor Services and Advisor Services segments. The Investor Services segment includes retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, retirement business, and support services as well as retirement business services, to independent registered investment advisors, independent retirement advisors, and recordkeepers. The company was founded by Charles R. Schwab in 1986 and is headquartered in San Francisco, CA.

Publicly traded companies mentioned herein: Charles Schwab Corp/The (SCHW), TD Ameritrade Holding Corp (AMTD)

Highlights

The presenter is long Charles Schwab Corp/The (SCHW), thinking it is timely now because the market is ascribing a historically low multiple to what he thinks is trough earnings power for the pro forma company, and despite the low interest rate environment. The yield SCHW earns on their investment book is tied to the 10-year. The presenter models $2.50 of trough earnings in 2022 with no recovery in interest rates or the 10-year. The stock currently trades at ~$36/share or 14x his 2022 earnings estimate. Historically, the stock's multiple has been in the mid-to-high 20s on non trough earnings. For instance, when interest rates were at 1.75%, the stock traded north of 25x. He has a ~$55/share price target based on applying a 22x multiple to his $2.50 in earnings or ~53% upside from the stock’s current price. If the Fed raises interest rates (which he doesn’t anticipate happening for quite some time) or there is a recovery in the 10-year, there could be a material uplift in earnings beyond his $2.50 number. 

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Idea Discussion

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