E*Trade Looks Down

The discount-broker vote was split until E*Trade (NYSE: ETFC  ) stepped up to the podium last night. The two other industry juggernauts couldn't agree on their sector's near-term prospects. TD AMERITRADE (Nasdaq: AMTD  ) came up short, while market leader Charles Schwab (Nasdaq: SCHW  ) held up considerably better.

In came E*Trade as the swing vote, and it seems the bears win this round. E*Trade joins AMERITRADE in hosing down its full-year guidance. Both companies are blaming market volatility and lackluster trading activity for their marked-down outlooks.

The situation's not too dire. E*Trade's earnings in the current quarter grew to $0.39 per share, after a $0.33-per-share showing a year earlier. Net revenue inched 8% higher. Analysts missed on both ends, expecting just $0.38 a share in profitability on a 12% top-line boost.

E*Trade's new per-share profit range is a reasonable $1.55 to $1.75 for all of 2007 -- just a nickel off of its original guidance.

Discount Broker	Recent Share Price	2007 guidance	2007
E*Trade	$22.13	1.55-1.75	12.6-14.3
TD AMERITRADE	$15.73	0.92-1.08	14.6-17.1
Charles Schwab	$19.29	0.92*	21.0

*Schwab did not provide guidance. The $0.92 is analyst consensus estimate.

On an earnings basis, the sector -- and E*Trade in particular -- look pretty cheap. Sure, financial-service providers usually command paltry multiples, but these are growing companies in the Web-based brokerage space.

With E*Trade making waves in the more conventional banking sector with products like its high-yielding Max-Rate Checking accounts, one would expect a healthier premium on the company's shares. Feel free to approach a dip today as a chance to get in on a dynamic company at an attractive rate. Even if you're one of the many traders crimping the industry by standing on the sidelines, it seems like a smart trade to make.

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Longtime Fool contributor Rick Munarriz has been trading exclusively through discount brokers since 1990, but he does not own shares in any of the companies in this story. He's also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.