TD Ameritrade or E*TRADE: Which Stock is a Better Pick?

TD Ameritrade Holding Corporation AMTD and E*TRADE Financial Corporation ETFC — the two investment brokers — have market capitalization of $28.9 billion and $13 billion, respectively. Being based in the same region, both companies are influenced by a similar economic environment.

The Zacks Industry Rank is #38 (top 14% of the 250 plus Zacks industries) for the industry, to which these companies belong to. Our back-testing shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.

Benefits from a stabilizing economy and the gradually improving interest-rate scenario have positioned the industry well. In terms of price performance, TD Ameritrade’s shares have gained 12.5% in the past year, while E*TRADE’s shares have rallied 37.9%.

Though both investment brokers have similar business trends, deeper research into the financials will help decide which investment option is better.

 

TD Ameritrade

TD Ameritrade has a trailing 12-month ROE of 15.91% compared with the industry average of 9.78%. This shows the company reinvests its earnings more efficiently.

Moreover, the company’s earnings for fiscal 2018 are projected to be up 26.6%, while sales are likely to rise 32.9%. Further, the dividend yield of the company is 1.63%.

Analysts seem optimistic about the stock’s earnings prospects. Over the last 60 days, TD Ameritrade has witnessed three upward revisions (against no downward revisions) for fiscal 2018. The Zacks Consensus Estimate has inched up 1.7% to $2.33 for 2018.

TD Ameritrade has a

VGM Score of B. Further, the stock carries a Zacks Rank #2 (Buy). Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.

E*TRADE

E*TRADE has a trailing 12-month Return on Equity (ROE) of 9.34% compared with the industry average of 9.78%. This shows the company is less efficient in reinvesting its earnings.

In addition, the company’s 2017 and 2018 earnings are projected to rise 22.4% and 15.7%, respectively, while sales are estimated to be up 50.6% and 9.92%, respectively.

Notably, the company does not pay any dividends at the current level.

Nevertheless, analysts seem optimistic about the stock’s financial performance. For 2017, it witnessed two upward revisions (against no downward revision) over the past two months. As a result, the Zacks Consensus Estimate for 2017 has inched up to $2.27.

E*TRADE currently carries a Zacks Rank #2. Also, it has a VGM Score of F. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Our Take

Both TD Ameritrade and E*TRADE are well positioned in terms of ROE, Zacks Rank as well as earnings and sales growth potential. However, VGM Score, a favorable dividend yield, along with more reinvestment potential, make TD Ameritrade a better pick.

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E*TRADE Financial Corporation (ETFC) : Free Stock Analysis Report
 
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