E*TRADE (ETFC) Stock Moves Up 9% in Q2: Is More Upside Left?

During the last earnings season, the Financial stocks were among the best performers. One such investment bank — E*TRADE Financial Corporation ETFC — climbed 9% in second-quarter 2017. It significantly outperformed the industry’s gain of 1.5%.

This price performance is backed by the gradually improving operating environment and rate hike scenario which is beneficial for brokerage business. Furthermore, anticipated improvement in trading activities and several of its ongoing initiatives will bode well for E*TRADE.

Apart from this, E*TRADE is part of the industry, which has a Zacks Industry Rank #69 (top 26%).

Moreover, the stock seems undervalued on the basis of its Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. E*TRADE has a P/E ratio of 18.05 compared with the S&P 500 average of 18.59. Also, the company’s P/B ratio of 1.79 comes below the S&P 500 average of 3.08.

Additionally, the estimates for this Zacks Rank #2 (Buy) stock have been on an upswing. Over the last 60 days, the Zacks Consensus Estimate moved up 15.4% and 7.9% for 2017 and 2018, respectively.

Fundamentally, E*TRADE’s earnings have grown 23.4% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. The company’s projected EPS (earnings per share) growth (F1/F0) is 21.8% for 2017 and (F2/F1) 8.8% for 2018.

Further, with a rise in rates, brokerage firms are likely to engage in more investment activities. As brokerage firms earn interest income on un-invested cash in customer accounts, this rate hike will enable these firms to invest at higher rates. As E*TRADE currently derives nearly 60% of its total net revenues from net interest income, the company is poised to benefit from recent rate hikes.

Additionally, E*TRADE is focused on derivatives mix with a target of increasing it to 35% of Daily Average Revenue Trades (DARTs) and also set managed account assets under management (AUM) target of $6 billion within the next two years. The company aims to achieve 2-3% improvement in its rate of annual organic growth, across accounts, assets and trades.

Other Stocks to Consider

Other top-ranked stocks in the same space are FB Financial Corporation FBK, LPL Financial Holdings Inc. LPLA and Salisbury Bancorp, Inc. SAL. All the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FB Financial’s earnings estimates have been revised 3.2% upward for 2017, in the past 60 days. Also, its share price has surged 66.4% in a year’s time.

LPL Financial’s earnings estimates for 2017 have been revised 4.1% upward, over the last 60 days. Further, in a year’s time, the company’s shares have jumped 56.8%.

Salisbury Bancorp witnessed a 2.4% upward earnings estimates revision for the current year, in a month’s time. Moreover, in the past year, its shares have gained 40.8%.

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FB Financial Corporation (FBK) : Free Stock Analysis Report
 
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