TD Ameritrade Rides on Inorganic Strategies: Time to Buy?
On Dec 26, we issued an updated research report on TD Ameritrade Holding Corporation AMTD. The company’s strong trading volumes, client focus and inorganic growth efforts are anticipated to yield positive results for the stock. Though rising expenses might hamper bottom-line growth, the recent interest rate hikes are likely to provide stability to the top line.
Further, shares of TD Ameritrade have rallied 19.7% over the last six months, outperforming the 19.5% growth of the industry.
Further, the company’s earnings estimates have been revised 1.3% upward for fiscal 2018 in the last 30 days. It currently carries a Zacks Rank #2 (Buy).
TD Ameritrade’s growth prospects look encouraging, given its inorganic activities. It recent acquisition of Scottrade Financial Services is expected to boost its retail business, bolster trading operations and expand its branch network substantially. Also, the deal is anticipated to generate double-digit EPS accretion, post conversion.
TD Ameritrade’s trading volumes improved consistently over the past few years on the back of volatility in markets. Notably, on a year-over-year basis, the company’s average client trades per day increased 10% in fiscal year 2017.It is further expected to benefit from a rising rate environment and the company’s innovative trading platforms, going forward.
Further, TD Ameritrade’s strong capital position enables it to undertake steady capital deployment activities. In October 2017, it raised quarterly stock dividend by 17%. With favorable debt/equity ratio compared to the industry’s average, these measures look sustainable.
Nevertheless, TD Ameritrade’s rising operating expenses remain a concern. It witnessed a CAGR of 6.3% over the last four fiscal years (ended 2017). Further, the company’s expense base will likely be under pressure given its ongoing investments in technology and advice and guidance offerings.
Other Stocks to Consider
Some other stocks in the finance space worth considering are E*TRADE Financial Corporation ETFC, Morgan Stanley MS and Interactive Brokers Group, Inc. IBKR, all carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
E*TRADE’s Zacks Consensus Estimate for current-year earnings has been revised nearly 1% upward for 2017, in the past 60 days. Also, the company’s share price has rallied 42.9% year to date.
Morgan Stanley’s current-year earnings estimates have moved slightly upward over the past 60 days. Further, the company’s shares have jumped 24.2% so far this year.
The Zacks Consensus Estimate for Interactive Brokers for the current year has been raised 3.2% upward over the last 60 days. Year to date, shares of the company have gained 64.8%.
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