Stock investors today face data overload. Aside from basic financial statements, there is a flood of ratios, statistics, multiples, analyst estimates, comps, margins, and industry-specific metrics to wade through.
In this regular series, I will choose a company and distill all the data down to three numbers you absolutely need to know before making a buy-sell-ignore decision.
Today's breakdown is for discount broker E*TRADE
E*TRADE did a 1:10 split in June. In other words, 10 shares combined to become one larger share. That ain't the good kind of split. With its stock price languishing below $2 a share, E*TRADE did it to stay well clear of the $1 per-share price the Nasdaq stock exchange requires to stay listed.
The next number explains why E*TRADE's shares were so low in the first place.
Because it got neck-deep in subprime assets, E*TRADE has written off $3.7 billion in bad loans and assets starting in Q3 2007.
As of the end of May, it carried $18.4 billion in loans outstanding -- $2.1 billion of those loans are delinquent. Lingering concerns over the quality of its balance sheet has weighed down E*TRADE's shares, but bulls point to its saving grace.
Enter the final number.
E*TRADE still has significant earning power in its 2.7 million brokerage accounts. If you stripped out the write-offs (a big if, I know), E*TRADE has generated $799 million in operating profit over the last 12 months.
Along with its competitors TD AMERITRADE
The bottom line
Analyzing E*TRADE is an exercise in weighing a ragged balance sheet versus viable business operations. Keep these three numbers in mind as you make your buy, sell, or ignore decision.
For another company broken down into just three numbers, click here.