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A Look at Charles Schwab’s Valuations

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Carles Schwab’s PE ratio

Charles Schwab (SCHW) has a PE ratio of 18.99x on an NTM (next-12-month) basis. The average for its competitors is 18.87x. Here are some of its competitors’ PE ratios on an NTM basis:

  • E*TRADE Financial (ETFC): 15.86x
  • TD Ameritrade Holding (AMTD): 14.40x
  • Interactive Brokers Group (IBKR): 26.36x

Brokerage companies might witness a boost in client engagement levels in the second half of 2018, primarily due to uncertainty in the global trade environment from trade wars. Clients of brokerage companies could adjust their portfolio holdings moving forward.

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What to expect in H2 2018

In the remaining half of 2018, the markets might see volatility, primarily as a result of rising trade war fears. In addition, if the Federal Reserve reacts to trade wars with only one rate hike in the second half of the year, the market could become volatile since two rate hikes are expected. Higher volatility could improve brokerages’ daily average revenue trades.

Rising trade tensions might hamper investor confidence in equities, and investors could opt for less risky investment opportunities. Moving forward, Charles Schwab might see a boost in inflows for its money market funds. However, higher demand might lead to a rise in these funds’ prices.

The PE ratio for Charles Schwab is 28.32x on an LTM (last-12-month) basis. Its peers (VFH) have the following PE ratios on an LTM basis:

  • E*TRADE Financial: 22.16x
  • TD Ameritrade Holding: 32.62x
  • Interactive Brokers Group: 16.77x
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