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AMTD vs. ETFC: Which Brokerage Stock is Better Positioned?

Zacks Equity Research

Investment brokerage stocks are anticipated to benefit from improving domestic economy and a decent equity market performance in the quarters ahead. Amid the Federal Reserve’s accommodative monetary policy stance, volatile markets and efforts to diversify revenue sources with technology advancement will support their financials over the long run.

Therefore, we are focusing on two investment brokers — TD Ameritrade AMTD and E*TRADE Financial ETFC. Both stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TD Ameritrade, with a market cap of $24.1 billion, provides securities brokerage and related technology-based financial services to retail investors and traders, and independent registered investment advisors (RIAs) in the United States. E*TRADE operates as a provider of various brokerage and related products and services for traders, investors, stock plan administrators and participants, and RIAs in the United States, and has a market cap of $10.1 billion.

Though both investment brokers have similar business trends, deeper research into the financials will help decide which investment option is better.

Price Performance

Both investment brokers have outperformed the industry (down 10.5%) over the past two years. While shares of E*TRADE have gained 4.2%, TD Ameritrade’s stock climbed 3.2%. So, E*TRADE performed better than TD Ameritrade.


Dividend Yield

Both companies have been deploying capital in terms of dividend payments to enhance shareholder value. TD Ameritrade has a current dividend yield of 2.74%, while E*TRADE has a dividend yield of 1.35%.

As compared with the industry’s average of 0.71%, shareholders of TD Ameritrade gain more.


Leverage Ratio

TD Ameritrade has debt-to-equity ratio of 0.42 as compared with the industry average of 0.38. But, E*TRADE, with a ratio of 0.28, has an edge over TD Ameritrade.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-months for E*TRADE and TD Ameritrade is 18.45% and 27.13%, respectively. While both stocks scored above the industry’s level of 11.76%, TD Ameritrade reinvests its earnings more efficiently.


Earnings Estimate Revisions & Growth Projections

The Zacks Consensus Estimate for 2019 earnings of E*TRADE decreased slightly over the last 30 days. The same for TD Ameritrade moved marginally north for the current fiscal year, during the same time frame.

Moreover, E*TRADE’s 2019 earnings are projected to jump 5.7% year over year. For TD Ameritrade, the Zacks Consensus Estimate is pinned at $4.00 for fiscal 2019, reflecting a year-over-year increase of 19.8%.

Hence, TD Ameritrade reflects better earnings growth prospects.

Sales Growth

Sales for TD Ameritrade for the ongoing fiscal year are projected to be up 8.3% year over year to $5.9 billion. For E*TRADE, the Zacks Consensus Estimate is pegged at $2.9 billion for 2019, reflecting year-over-year growth of 1.7%.

Therefore, TD Ameritrade has an edge here as well.


Our comparative analysis shows that TD Ameritrade is better positioned than E*TRADE, when considering earnings and sales growth expectations, reinvesting potential and dividend yield. E*TRADE wins on price performance and leverage ratio.

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E*TRADE Financial Corporation (ETFC) : Free Stock Analysis Report
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