Taking Charles Schwab's
The discount broker kicked off fiscal 2008 in fine fashion, with first-quarter profits soaring 67% higher to $0.40 per share. Net revenues inched 20% higher to $641.6 million. The performance lapped the market's expectations on the top and bottom lines.
With $300 billion in client assets under its watch, the growing discounter made the most of a turbulent quarter where investors smelled both fear and opportunity. This doesn't mean that the typical TD AMERITRADE customer is a frenetic trader with the stability of a tornado. The average account is on pace to complete just 12.6 trades this fiscal year (higher than the pace of 9.5 trades at this point last year). Accountholders will be happy to know that they are paying slightly less, with the average commission and transaction fee dropping from $13.04 to $12.84 per trade.
Shareholders obviously don't need to worry about that customer-friendly move. TD AMERITRADE is clearly making it up in volume. Giving customers a better deal and still bumping up pre-tax profit margins to 56%? That's a win-win, my friends.
It won't be until next week's quarterly report out of E*Trade
The discount brokerage industry has certainly delivered over the past year. At this point last year, investors must have been nervous, with banks like Wells Fargo
So where does TD AMERITRADE go from here? Coming off a record quarter, the broker is raising its near-term outlook. For the fiscal year ending in September, TD AMERITRADE is now looking to earn between $1.23 a share and $1.41 a share. That prices the shares at an attractive earnings multiple in the mid-teens, though guidance is never a safe bet in this industry.
Revisions happen on a quarterly basis, as accountholders either clam up or feed into the market's trigger-finger urges. So raise a glass to TD AMERITRADE; three months from now you'll either be bringing that goblet down or raising it even higher.
In the market for a new discount broker? The way that rates and initial deposits are bouncing around, I can't say that I blame you. Check the sponsored broker comparison table in the Discount Broker Center to see if you can find the bargain-minded brokerage outfit that's right for you.
Charles Schwab has been singled out to Stock Advisor subscribers. See how your trades stack up against the newsletter's scorecard for free with a 30-day trial subscription. Bank of America got the nod from Motley Fool Income Investor. And yes, the same 30-day trial can be had there, too.
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 is 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.
More from The Motley Fool
Commission-Free ETFs: Not Always the Best Choice
TD Ameritrade’s recent decision to overhaul its list of commission-free ETFs is just a sign of the times. Discount brokers can't work for free, and we shouldn't expect them to.
My 3 Biggest Stock Holdings
My top three have produced excellent returns, and I think there's more where that came from.
From First to Worst: Ranking 8 Online Brokerages Based on Customer Loyalty
If customer loyalty leads to outperformance, the online brokers at the top of this list have an incredible opportunity in front of them.