On May 21, 2014, we issued an updated research report on
).The investment brokerage firm exhibits decent fundamentals amid a
competitive environment across the industry.
TD Ameritrade's efforts in driving organic growth are commendable.
The company is leading with an increasing asset base. It has
witnessed continued growth in net new client assets since 2008.
Notably, during the 6 months ended Mar 2014, funded accounts moved
up 4.5% year over year, while total client assets increased 19.4%.
Despite the prevailing sluggish macroeconomic environment, TD
Ameritrade's trading volumes have shown an increasing trend.
Notably, the company reported whooping monthly average client
trades per day of 501,000 for Feb 2014, which marked an all-time
high in the company's trading history.
Further, TD Ameritrade's net revenue recorded a 3.5% compounded
annual growth rate (CAGR) over the last 4 years and continued the
upward trend during the 6 months ended Mar 2014 with 17.6%
year-over-year growth. Given the company's efficient business
model, we expect significant top-line growth in the near
Further, TD Ameritrade's fiscal second-quarter 2014 earnings of 35
cents outpaced the Zacks Consensus Estimate by 2.9%. Notably, the
company delivered positive earnings surprises in the trailing 4
quarters with an average beat of 5.3%.
Despite the positives, we remain cautious owing to several issues
faced by TD Ameritrade that pose a threat to the company's
financials. Absence of steady and sustainable growth in its net
interest income amid a low interest rate environment will continue
to weigh on its profitability. The company witnessed declining net
interest income in the 6 months ended Mar 2014, as NIM declined 6
basis points year over year to 1.49%.
We also remain concerned owing to the prevailing stringent
Analysts' mixed view on the stock was reflected in the movement of
the Zacks Consensus Estimate over the past 60 days. For fiscal
2014, the Zacks Consensus Estimate advanced 2.1% to $1.44 per share
while it declined nearly 1% to $1.69 per share for fiscal 2015.
TD Ameritrade currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
KCG Holdings, Inc.
Interactive Brokers Group, Inc.
) are among the better-ranked stocks in this space. All these
stocks hold a Zacks Rank #1 (Strong Buy).
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TD AMERITRADE (AMTD): Free Stock Analysis
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