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America is Great Again for TD Bank

Stock (Symbol)

TD Bank (TD)

Stock Price

$51

Sector
Financial
Data is as of
January 14, 2017
Expected to Report
Feb 23 – 27
Company Description
toronto_dominionTD operates as a bank in North America. TD conducts its business through segments, such as Canadian Retail, U.S. Retail, Wholesale Banking and Corporate. Canadian Retail provides a range of financial products and services to customers in the Canadian personal and commercial banking businesses, including credit cards, auto finance, wealth and insurance businesses. U.S. Retail consists of the Bank’s retail and commercial banking operations operating under the brand TD Bank, America’s Most Convenient Bank, and wealth management services in the United States. Wholesale Banking provides a range of capital markets, investment banking, and corporate banking products and services, including underwriting and distribution of new debt and equity issues, providing advice on strategic acquisitions and divestitures, and meeting the daily trading, funding and investment needs of its clients. TD is also an online financial services firm. Source: Thomson Financial
Sharek’s Take
David SharekTD Bank (TD) just closed its 2016 fiscal year and with the Canadian side posting profit growth of 1% and America at 9%. Toronto-Dominion, better known as TD Bank, is Canada’s 2nd largest bank with a concentration in Southern Canada and the eastern US. The Canadian division still had double the profits as the American one, but low interest rates and lower oil as resulted in sluggish Canadian GDP growth. Canada is an exporter of oil, and low oil prices made it hard on producing provinces Alberta, Saskatchewan, Newfoundland and Labrador. The cut in income was to the equivalent of $1500 per year for each Canadian citizen, and thus economic growth in Canada is slow. For fiscal 2016, Canadian profits rose 1% on 5% loan growth and a 10% increase in deposits. US retail bank profits rose 9% last year on 11% loan growth and 9% deposit growth, and was helped by the addition of the Nordstrom card assets. In October, TD agreed to acquire Scottrade, which will further boost US retail growth. This company is a digital success, with the highest number of mobile visitors according to Comscore. in 2016 it introduced a new electronic F/X trading platform as well as a paperless claims process in its insurance business. TD believes it can deliver 2017 profit growth of 7% to 10% if U.S. conditions are sustained. With a 13 P/E the stock is still below the 14 P/E it usually has. With rates on the rise in the U.S, I feel the P/E should be 15 and my 2017 Fair Value is $59, implying 15% upside in addition to that plump 3%-plus dividend.
One Year Chart
Big qtr for the stock as the Trump rally helped out banks big time. We exchange CAD to USD profits each qtr, and don’t look back to re-do the previous year. I had profits up 16% last qtr (TD reported 7%) on 9% revenue growth. This beat profit estimates by 1%. Looking ahead, profits are Estimated to grow 8%, 1%, 4% and 9% the next 4 qtrs. The Est. LTG of 7% is below the 10% I like in conservative stocks, but Ok when you factor in the 3% yield.
Fair Value
Last qtr I was growing impatient with this stock — then BOOM it took off and jumped 13%. STILL there seems to be great upside potential ahead.
Bottom Line
TD Bank gives investors a conservative bank stock with a fat yield a double-digit estimated total annual return. Although the stock is up a bunch in the last qtr, there’s still solid upside to TD’s Fair Value. I don’t think you should see your bank stocks even though they have gone up a bunch. We could be in the 1st inning of a long-term trend in which bank stocks compound in value. TD ranks 17th of 30 stocks in the Conservative Growth Power RankingsDisclosure: Scottrade is a brokerage firm used by Shareks, LLC to hold client assets and make trades.
Power Rankings
Growth Stock Portfolio

N/A

Aggressive Growth Portfolio

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Conservative Stock Portfolio

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