Looking Beyond Chuck's Earnings

Charles Schwab (NYSE: SCHW) produced a 16% rise in year-over-year profit in its latest quarterly results. Its smart acquisitions and strong performance have already made me bullish about it. Now I've decided to put it through the wringer to see whether it deserves space in my portfolio.

Performance
Despite sluggish trading activity across the brokerage industry, Schwab came away with a fruitful quarter. Higher asset management and interest revenue helped the company increase its net income by $33 million from the same quarter a year ago. Revenue rose 10% to $1.19 billion. Trading has slowed a bit, but that recent trend was offset by Schwab clients gravitating to higher-margin services like advisory solutions, along with more assets under management.

The table below gives you an idea of how Chuck scores from an investment standpoint when compared to its peers:

Schwab's price-to-earnings ratio is better than those of E*TRADE and GFI Group. But TD AMERITRADE scores the cheapest multiple of the four.

Schwab also offers a better dividend yield than most of its peers. Although GFI's yield is the highest of the four, its payout ratio is also high, suggesting that the dividend may be unsustainable.

With its acquisition of optionsXpress (Nasdaq: OXPS), Schwab is shaping up to have an exciting next few years in terms of growth. Though the optionsXpress deal has been the big focus recently, Schwab seems to have other plans to catalyze growth. For example, it's partnering with Broadridge Financial (NYSE: BR) to help strengthen its position in offering better access to the global investment trading market. Schwab appears to be a company with a compelling future, and that makes me all the more intrigued looking at its current numbers.

With strong fundamentals, stable returns, and impressive earnings, I continue to hold my optimistic view of the company.

Are you shopping for a broker? Learn more about what top companies can offer you in our Broker Center.