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.