The recent announcement by the Fed that it would be extending low interested rates until 2014 puts both Charles Schwab (SCHW) and TD Ameritrade (AMTD) in a precarious position. The Street currently rates the former a "hold" and the latter a weak "buy". Based on my multiples analysis and DCF model, I agree with this sentiment.
From a multiples perspective TD Ameritrade is the cheaper of the two. It trades at a respective 14.3x and 12.4x past and forward earnings with a dividend yield of 1.5%. Charles Schwab trades at a respective 16.4x and 13.9x past and forward earnings with a dividend yield of 2.1%. Both firms are 30% more volatile than the broader market.
At the first quarter earnings call, TD Ameritrade's CEO, Fred Tomczyk, noted the business environment:
"When we met last quarter, we talked about the high degree of uncertainty in the markets and the fear of
Read »
