There was a lot to like in optionsXpress'
For the quarter, optionsXpress sported robust 26% sales growth and 29% net income growth. Client assets increased 29% year over year to $5.3 billion, and net cost per new account increased 180% to $300. I'm extremely interested in that last metric, because online advertising is critical to online brokers, and I've heard a lot of rumblings that online advertising has gotten too expensive. (Think Google search words.)
Company executives noted in the conference call that they are trying to broaden their customer base and seek out both current investors and people new to the market. They hope to hire a chief marketing officer to help roll out this strategy and have already had a lot of success with seminars and educational programs for customers.
optionsXpress' futures and wholesale trading businesses give the company a spacious and promising avenue for growth, now that retail investors are especially becoming more and more comfortable with futures trading. New accounts in this area increased 21% year over year, and the company added 11,500 new accounts this quarter.
Management did address concerns about trading in penny increments for options contracts, rather than in nickel increments. Payment rates were at all-time highs for the quarter, and management believes that even if penny increment trading becomes the standard, the company will still be able to monetize order flow in a lucrative way.
I think optionsXpress is a remarkable company. It has high 64% pre-tax margins, the highest average commission of all the online public brokers, and the highest pre-tax profit of $660 per account. A lot of its initiatives, especially those involving futures and wholesale trading, look to finish nicely in the money.
- Brokerages Want You to Know ...
- 5-Star Financials: optionsXpress
- optionsXpress Back on the Customer Track
Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates hearing your comments, concerns, and complaints. The Motley Fool has a disclosure policy.
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