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Is The Charles Schwab Corporation (NYSE:SCHW) Potentially Undervalued?

Simply Wall St

The Charles Schwab Corporation (NYSE:SCHW) received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Charles Schwab’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Charles Schwab

What's the opportunity in Charles Schwab?

According to my valuation model, Charles Schwab seems to be fairly priced at around 3.9% below my intrinsic value, which means if you buy Charles Schwab today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $51.62, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Charles Schwab’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Charles Schwab look like?

NYSE:SCHW Past and Future Earnings, December 12th 2019

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 5.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Charles Schwab, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in SCHW’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on SCHW, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Charles Schwab. You can find everything you need to know about Charles Schwab in the latest infographic research report. If you are no longer interested in Charles Schwab, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.