When The Charles Schwab Corporation (NYSE:SCHW) announced its most recent earnings (31 December 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Charles Schwab performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see SCHW has performed. See our latest analysis for Charles Schwab
Were SCHW’s earnings stronger than its past performances and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to examine various companies on a similar basis, using new information. For Charles Schwab, its latest earnings (trailing twelve month) is $2,180.0M, which, against last year’s figure, has risen by 24.86%. Since these figures are relatively myopic, I’ve estimated an annualized five-year value for Charles Schwab’s net income, which stands at $1,239.7M. This means generally, Charles Schwab has been able to gradually improve its net income over the last couple of years as well.
What’s enabled this growth? Let’s see whether it is only because of an industry uplift, or if Charles Schwab has experienced some company-specific growth. Over the past couple of years, Charles Schwab increased its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Viewing growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 18.01% in the prior year, and 11.21% over the past half a decade. This means that whatever uplift the industry is enjoying, Charles Schwab is capable of amplifying this to its advantage.
What does this mean?
Though Charles Schwab’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Charles Schwab gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Charles Schwab to get a more holistic view of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for SCHW’s future growth? Take a look at our free research report of analyst consensus for SCHW’s outlook.
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2. Financial Health: Is SCHW’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
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3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
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.