To really understand a stock, you just have to get down and dirty, break out your pencil, and really weigh the risk-versus-reward potential of the company you're following. I propose we take a closer look at the good and the bad at TD AMERITRADE (Nasdaq: AMTD) to see if the stock is a good value or a potential money pit.

The good
TD AMERITRADE garnered headlines today by showing up rival Charles Schwab (Nasdaq: SCHW) in the earnings column. Whereas Charles Schwab reported a quarterly decline in earnings, TD AMERITRADE highlighted consistent organic growth as the key to a 6.5% jump in profit. On a year-over-year comparison, trading volume has been down, but TD AMERITRADE's figures showed strong growth over the prior quarter. It also continues to put shareholders first by instituting its first-ever quarterly dividend and repurchasing 3.2 million shares during the quarter.

However, a TD AMERITRADE bull would love to see a higher interest rate. That would mean a healthier interest net margin for TD AMERITRADE, which should translate into bigger profits -- and history is likely on the bulls' side. The Federal Reserve has pledged to keep the near-term rate at historic lows, but there's little likelihood it stays this low in the long term.

The bad
We do, however, have to keep in mind that the brokerage industry is still walking on eggshells. Competitor E*TRADE Financial (Nasdaq: ETFC) is still coping with the aftereffects of its decision to operate as a mortgage originator prior to the housing meltdown, and it hasn't turned in a full-year profit since 2006. Charles Schwab has had its revenue decline every year since 2007, as well.

Investors seem to be betting that TD AMERITRADE hasn't done a good enough job of differentiating itself from the rest of the brokerage sector by taking heavy short positions in the stock. Currently, 11% of TD AMERITRADE's float is held by short sellers, and put option activity has greatly increased. An increase in short sellers isn't enough to guarantee that a company is heading lower, but it's a good indication that it may be perceived as overvalued.

The takeaway
TD AMERITRADE has already had a very impressive run off its September lows, so the question now becomes: Does it have what it takes to continue to grow while its competitors languish? The prospect of a higher interest rate bodes well for its profitability, but it has also had trouble meeting analyst expectations in three of the past five quarters. Despite TD AMERITRADE's strength amid overall sector weakness, I'd consider listening to the growing short presence and passing at these levels.

More related Foolishness:

Fool contributor Sean Williams does not own shares in any companies mentioned in this article. He has aspirations of visiting the town of Scottrade as portrayed in the commercials. You can follow him on CAPS under the screen name TMFUltraLong. Charles Schwab is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy which never requires a limit order to be successful.