Are strong fundamentals for Schwab enough to break its downward trend?
As a company, financial services firm Charles Schwab Corp. (NYSE: SCHW) has performed extremely well in recent years. Unfortunately the stock has not performed as well as the company. If we break down the different analysis styles we see that Schwab’s fundamentals are really good and above average in almost every category, but the price performance or technical analysis shows that the stock has been below average.
Schwab has seen earnings grow by 34% per year over the last three years while sales have grown by 17% per year. Earnings grew by 10% in the most recent quarterly report and sales increased by 12%. Analysts expect earnings to grow by 9% for 2019 as a whole and sales are expected to increase by 5.8%.
The company’s management efficiency measurements are solid with a return on equity of 17.9% and a profit margin of 41.5%. The ROE is slightly above average and the profit margin is well above average.
The sales growth and the strong management efficiency measurements give the company a good SMR rating from Tickeron. The rating for Schwab is 15 and it indicates very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
As good as the fundamentals are, the Tickeron Valuation Rating of 59 indicates that the company is fair valued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.
The Tickeron Profit vs. Risk Rating for Schwab is 62, indicating well-balanced risk and returns. The average Profit vs. Risk Rating for the industry is 73, placing this stock slightly better than average.
Where we run in to problems with Schwab is when it comes to the chart and the price performance. We see on the weekly chart that the stock has been trending lower since the second quarter of 2018. If we go back and connect the highs from July ’18 with the highs from September ’18, we get a downward sloped trend line that is in close proximity to the 52-week moving average. The stock just hit this trend line and has once again turned lower.
The Tickeron Price Growth Rating for Schwab is 78, indicating slightly worse than average price growth. The stock price has grown at a lower rate over the last 12 months as compared to S&P 500 index constituents. A rating of 1 points to highest price growth (largest percent return) while a rating of 100 points to lowest price growth (smallest percent return).
The Tickeron PE Growth Rating for Schwab is 75, pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.
Looking at the sentiment toward Schwab, we see analysts’ ratings that are slightly less optimistic than the average stock and a short interest ratio that indicates slightly more optimism than the average stock. There are 20 analysts covering the stock with 12 “buy” ratings, seven “hold” ratings, and one “sell” rating. This puts the buy percentage at 60% and that is just below the average range.
The short interest ratio is currently at 1.9 and that is below average and indicates there is less pessimism toward Schwab than toward the average stock. From a contrarian perspective, more pessimism would be a positive sign given the company’s fundamental strength. More bearish sentiment could also help the stock break the downward trend if there is a shift in the sentiment. Unfortunately I don’t think there is enough bearish sentiment to make a big difference for Schwab.
SCHW's MACD Histogram just turned positive
The Moving Average Convergence Divergence (MACD) for SCHW turned positive on April 22, 2024. Looking at past instances where SCHW's MACD turned positive, the stock continued to rise in of 43 cases over the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on April 16, 2024. You may want to consider a long position or call options on SCHW as a result. In of 78 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SCHW advanced for three days, in of 297 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 296 cases where SCHW Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The RSI Indicator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 4 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SCHW declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
SCHW broke above its upper Bollinger Band on April 23, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. SCHW’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 74, placing this stock slightly better than average.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (4.156) is normal, around the industry mean (5.433). P/E Ratio (28.492) is within average values for comparable stocks, (35.241). Projected Growth (PEG Ratio) (1.234) is also within normal values, averaging (2.610). Dividend Yield (0.014) settles around the average of (0.030) among similar stocks. P/S Ratio (7.032) is also within normal values, averaging (105.216).
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a provider of securities brokerage and other financial services
Industry InvestmentBanksBrokers