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What Could Improve TD Ameritrade’s Valuation


Jan. 26 2018, Updated 9:04 a.m. ET

Lower valuation

TD Ameritrade (AMTD) has an NTM (next-12-month) PE (price-to-earnings) ratio of 18.4x, trading at a discount to peers’ average of 20.1x. Peers Financial Engines (FNGN), Raymond James Financial (RJF), and CBOE Global Markets (CBOE) have NTM PE ratios of 17.7x, 14.3x, and 28.3x, respectively.

TD Ameritrade could recover from its discounted valuation with quarterly payouts and a strong outlook for fiscal 2018. The company has recently raised its quarterly dividend payouts. It declared a dividend of $0.18 per share in July 2017 and $0.21 per share in October 2017.

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Price target

Another metric that could improve TD Ameritrade’s valuation is analysts’ one-year price target for the stock. Analysts have given AMTD a target of $63, which represents an 11.3% rise from its current price of $56.59.

TD Ameritrade’s recent 24-hour trading move, which will help clients in Asia, could also improve its valuation. In fiscal 1Q18, the company paid $119 million in cash dividends. Whereas TD Ameritrade has an LTM (last-12-month) PE ratio of 32.2x, peers (XLF) Financial Engines, Raymond James Financial, and CBOE Global Markets have LTM PE ratios of 38.9x, 22.4x, and 73.0x, respectively.


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