Charles Schwab ( SCHW ) has seen impressive growth in recent years. Revenue grew at a CAGR of 12% and its stock price jumped over 3x in the last 5 years. The company's continued efforts in innovating financial products and providing its customers with effective financial advisory services should continue to help drive asset management fees. An already large asset base and the expectation of further interest rate hikes should drive interest earning revenues. Improvement in the U.S. macro conditions should drive trading volumes and consequently, trading commissions, despite fee cuts in response to intense competition.
Our price estimate for Charles Schwab's stock stands at $55 , which is above the market price. We have also created an interactive dashboard which shows the forecast trends; you can modify the key value drivers to see how they impact the company's revenues and bottom line.
Schwab's assets under management and revenues from the asset management segment have seen over 10% growth annually over the last 5 years. With increasing demand for financial advisory and Schwab's leading position in the ETF industry, we expect 8.3% annual growth in assets and 14% growth in revenues.
The company's decision to cut its commissions per trade by nearly 40% earlier in 2017 has led to a more than 20% decline in its trading revenues through the year. Increased competition from discount and traditional brokerages led Schwab to reduce its commissions. We expect that that pressure will be offset to some extent by improvement in U.S. market conditions which should drive trading volumes higher.
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