The Charles Schwab Corporation (NYSE: SCHW) and E*TRADE Financial Corporation (NASDAQ:ETFC) are both large-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, dividends and analyst recommendations.

Profitability

This table compares The Charles Schwab Corporation and E*TRADE Financial Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Charles Schwab Corporation 26.73% 15.41% 0.98%
E*TRADE Financial Corporation 28.42% 9.06% 1.03%

Risk and Volatility

The Charles Schwab Corporation has a beta of 1.68, suggesting that its share price is 68% more volatile than the S&P 500. Comparatively, E*TRADE Financial Corporation has a beta of 1.47, suggesting that its share price is 47% more volatile than the S&P 500.

Institutional & Insider Ownership

79.5% of The Charles Schwab Corporation shares are held by institutional investors. Comparatively, 92.6% of E*TRADE Financial Corporation shares are held by institutional investors. 12.0% of The Charles Schwab Corporation shares are held by company insiders. Comparatively, 0.2% of E*TRADE Financial Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares The Charles Schwab Corporation and E*TRADE Financial Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
The Charles Schwab Corporation $8.08 billion 7.37 $2.00 billion $1.49 29.84
E*TRADE Financial Corporation $2.32 billion 5.27 $592.13 million $2.15 20.64

The Charles Schwab Corporation has higher revenue and earnings than E*TRADE Financial Corporation. E*TRADE Financial Corporation is trading at a lower price-to-earnings ratio than The Charles Schwab Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations for The Charles Schwab Corporation and E*TRADE Financial Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Charles Schwab Corporation 0 6 10 0 2.63
E*TRADE Financial Corporation 0 5 11 0 2.69

The Charles Schwab Corporation currently has a consensus target price of $45.27, indicating a potential upside of 1.81%. E*TRADE Financial Corporation has a consensus target price of $43.29, indicating a potential downside of 2.47%. Given The Charles Schwab Corporation’s higher probable upside, analysts plainly believe The Charles Schwab Corporation is more favorable than E*TRADE Financial Corporation.

Dividends

The Charles Schwab Corporation pays an annual dividend of $0.32 per share and has a dividend yield of 0.7%. E*TRADE Financial Corporation does not pay a dividend. The Charles Schwab Corporation pays out 21.5% of its earnings in the form of a dividend.

Summary

The Charles Schwab Corporation beats E*TRADE Financial Corporation on 9 of the 16 factors compared between the two stocks.

The Charles Schwab Corporation Company Profile

The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, ETFs, advice solutions, banking and trust. Brokerage provides a range of brokerage accounts with cash management capabilities. Mutual funds offer third-party mutual funds through the Mutual Fund Marketplace.

E*TRADE Financial Corporation Company Profile

E*Trade Financial Corporation is a financial services company. The Company provides online brokerage and related products and services primarily to individual retail investors under the brand E*TRADE Financial. The Company also provides investor-focused banking products, primarily sweep deposits, to retail investors. It provides its services to customers through its digital platforms and network of industry-licensed customer service representatives and Financial Consultants, over the phone and by e-mail. The Company’s brokerage business is organized into three product areas: Trading, Investing, and Corporate Services. The Company’s Trading products deliver automated trade order placement and execution services. The Company’s Investing products help investors build wealth and address their long-term investing needs. The Company’s Corporate Services channel provides stock plan administration services for both public and private companies.

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