With several stock indices hitting all-time highs in recent months and with the market experiencing one of the longest bullish runs in history, you would think online brokers would be performing well. But that hasn’t been the case in recent months as stocks from the industry have slipped slightly. However, I found a trio of brokerage stocks that look primed to move higher in the coming months.
TD Ameritrade (NASDAQ:AMTD), E*Trade Financial (NASDAQ:ETFC) and Charles Schwab (NYSE:SCHW) have all moved lower over the past few months, but I think that is providing a buying opportunity in each of these online broker stocks, as all three of these companies are strong fundamentally.
Online Broker Stocks to Buy: TD Ameritrade (AMTD)
TD Ameritrade has averaged earnings growth of 22% per year for the last three years. The latest quarterly results showed earnings growth of 85% and analysts expect the company’s earnings to grow by 80% for the year.
AMTD’s sales grew by 48% in the most recent quarter and have averaged growth of 14% annually for the last three years.
One of the company’s most impressive stats is its profit margin, which is at 42.4%. The return on equity is a respectable 15.9%.
The chart for AMTD stock shows that it has been trending higher since the beginning of 2016 and a trend channel has formed that has sort of dictated the cyclical climb. The stock just hit the lower rail of the channel this past week. We also see the 52-week moving average is coming into play much like it did in mid-2017 — right before the stock rallied from the $37.50 range to $62.50.
Online Broker Stocks to Buy: E*Trade (ETFC)
E*Trade has seen similar earnings growth. The company has averaged annual earnings growth of 40% for the last three years with the most recent quarterly growth at 83%. Analysts expect earnings growth of 60% for the year.
The sales growth for the last three years has been a little better for ETFC with an average of 20%, while the recent quarterly growth wasn’t as good as TD Ameritrade’s at 25%.
Like we saw with AMTD, E*Trade’s profit margin is an incredible 45.9%, while the return on equity is at 9.7%.
Also similar to AMTD stock, E*Trade is battling to remain above its 52-week moving average. We also see a trendline for ETFC stock that connects the lows from the last few years. The weekly stochastic readings for E*Trade are the lowest they have been since early 2016 when the stock was trading under $22.50 a share. The stock went on to rally sharply and eclipsed the $65 level earlier this year.
Online Broker Stocks to Buy: Charles Schwab (SCHW)
Schwab’s earnings growth isn’t as high as the other two, but it is still well above average. Over the last three years, the company has averaged earnings growth of 28%. The most recent quarter showed earnings growing by 54% and analysts are looking for earnings growth of 48% for this year.
Like we saw with TD Ameritrade and ETFC, the profit margin is phenomenal at 40.7%, while the ROE is slightly above average at 13.7%. SCHW’s sales growth has averaged 15% over the last three years and was 17% in the most recent quarter.
Like we saw with TD Ameritrade, SCHW stock has been moving higher since early 2016 and the cyclical move has been defined by a trend channel. The stock is sitting on the lower rail of the channel currently and the stock is oversold based on its weekly stochastic readings. The last time we saw those two conditions met was in mid-2016 and the stock was trading at $25. Two years later, SCHW stock was trading at $60 a share.
All three of these discount brokerage firms have seen strong earnings growth, they all have great profit margins, and all three are hitting support areas that should propel them higher in the coming months.
As of this writing, Rick Pendergraft did not hold a position in any of the aforementioned securities.