On Dec 24, 2015, we issued an updated research report on TD Ameritrade Holding CorporationAMTD . We believe the company's sustained organic growth apart from several other factors including a strong capital position and steady trading activities acted as tailwinds. However, in the absence of steady cost control measures, escalating costs will lead to operational inefficiency and might hinder bottom-line expansion.
Despite the prevailing sluggish macroeconomic environment, TD Ameritrade's trading volumes have increased considerably. The company's average client trades per day increased 4%, 14% and 8% year over year in fiscal 2013, 2014 and 2015, respectively, benefiting from the volatility in markets. We believe that in the near term, TD Ameritrade will be able to increase its trading volumes further owing to a rebound in equity markets and benefits from its innovative trading platforms.
TD Ameritrade has been diligently making efforts to maintain its asset gathering momentum over the past few years. Sustaining the trend, during fiscal 2015, the company witnessed an annualized growth rate of 10% in net new client assets, within the long-term target of increasing net new client assets on an annual rate of 7% to 11%.
Additionally, the company's net revenue recorded a 5% CAGR over the last 6 years ending fiscal 2015. Based on the company's solid business model, focus on high net-worth clients and improving service model to boost engagement and retention, we expect TD Ameritrade to experience significant top-line growth in the future.
Nevertheless, we remain cautious regarding the slow improvement in net interest margin (NIM). Other concerns include lack of geographical expansion that limits growth prospects, higher expenses and the prevailing stringent regulatory landscape. Notably, total operating expenses are expected to increase 2% to 6% on a year-over-year basis in fiscal 2016.
Analysts' neutral stance on the stock was reflected in the estimates over the past 7 days. For fiscal 2016 and 2017, the Zacks Consensus Estimate remained unchanged at $1.63 and $2.03 per share, respectively.
TD Ameritrade currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks in the same sector include Arlington Asset Investment Corp. AI , E*TRADE Financial Corporation ETFC and KCG Holdings, Inc. KCG . All of these stocks hold a Zacks Rank #2 (Buy).