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Will E*TRADE Financial Corporation’s (NASDAQ:ETFC) Earnings Grow In The Years Ahead?

James Harlett

E*TRADE Financial Corporation’s (NASDAQ:ETFC) announced its latest earnings update in December 2017, which suggested that the business benefited from a small tailwind, eventuating to a single-digit earnings growth of 6.70%. Below, I’ve presented key growth figures on how market analysts view E*TRADE Financial’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. See our latest analysis for E*TRADE Financial

Market analysts’ prospects for next year seems optimistic, with earnings rising by a robust 49.42%. This growth seems to continue into the following year with rates arriving at double digit 64.53% compared to today’s earnings, and finally hitting US$1.08B by 2021.

NasdaqGS:ETFC Future Profit Apr 19th 18

Although it is informative understanding the growth rate each year relative to today’s value, it may be more insightful to determine the rate at which the earnings are rising or falling on average every year. The pro of this method is that we can get a better picture of the direction of E*TRADE Financial’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 14.39%. This means that, we can assume E*TRADE Financial will grow its earnings by 14.39% every year for the next couple of years.

Next Steps:

For E*TRADE Financial, there are three essential factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is ETFC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ETFC is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ETFC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.