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Analyzing Charles Schwab’s Premium Valuations


Mar. 5 2018, Updated 7:33 a.m. ET

Price-to-book ratio

The Charles Schwab Corporation’s (SCHW) price-to-book ratio stands at 3.57x on an NTM (next-12-months) basis. The company’s competitors Morgan Stanley (MS), Bank of New York Mellon Corporation (BK), and LPL Financial Holdings (LPLA) have price-to-book ratios on an NTM basis of 1.35x, 1.39x, and 6.47x, respectively.

The main reason for the Charles Schwab’s higher valuations could be the company’s strong metrics in January. It reported total client assets of $3.48 trillion as of January 31. However, the company witnessed net selling activity in money market funds in January.

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Further increase in valuations

Charles Schwab could see a further increase in valuations. It’s expected to benefit from the new US tax law, which could help the company invest and improve long-term performance. The company also has a positive market outlook.

Charles Schwab has rewarded employees, resulting in an improved financial picture among market participants. The company is also focusing on generating returns for shareholders.

Charles Schwab’s price-to-book ratio stood at 3.83x on an LTM (last-12-month) basis. Peers (XLF) Morgan Stanley (MS), Bank of New York Mellon Corporation (BK), and LPL Financial Holdings (LPLA) recorded 1.29x, 1.40x, and 6.09x, respectively.


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