Stock (Symbol) |
TD Bank (TD) |
Stock Price |
$36 |
Sector |
| Financial |
Data is as of |
| January 10, 2016 |
Expected to Report |
| Feb 25 |
Company Description |
 TD operates as a bank in North America. The Bank 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. Source: Thomson Financial |
Sharek’s Take |
 Toronto Dominion Bank (TD), better known as TD Bank, is Canada’s 2nd largest bank with a concentration in Southern Canada but has most of its locations across the eastern US. I bought TD last year because this safe stock that had perennially sold for 14x earnings and I was able to pick it up for 11x. I felt the $40 stock was worth $50 to $55, and was paying a nice yield of 3.5%. But instead of the stock going up it went down, as the Canadian dollar weakened. Around 2012-2013, $1 USD was worth $1 Canadian dollar. But the past two years the loonie has dropped 33% to $0.68, the lowest levels since 2003. Thus, TD’s 2016 profit estimate fell from $3.78 2 qtrs ago to $3.43 now. 2017’s estimate has fallen from $4.14 to $3.65 during that time. Canada’s economy barley grew during the third qtr, which is still better than the negative growth the prior six months, as low oil prices have crushed esports. Imports are expensive and the Canadian government has slashed interest rates to try and jump start the economy, which hurts banks. TD is expected to have negative profit growth the next 3 qtrs. I would like to sell, but the stock has just fallen with the equity markets this month, and I would like it to rebound first. |
One Year Chart |
 I could deal with mid-single digit profit growth like TD was putting out, but now growth is expected to go negative and that’s not good. The P/E of 11 is nice but with annual profit estimates in decline the P/E can stay the same while the stock falls. |
Fair Value |
 This stock almost always has a P/E of 14 or 15, but not in this environment. My Fair Value of 12x earnings assumes profit estimates stay steady, but offers good upside from this (depressed) level. |
Bottom Line |
Toronto Dominion Bank is a stock that analysts expect will grow profits 7% a year long-term and if you tack on a 4% yield you might have a double-digit grower with lots of safety — one that you bought at 11x earnings. But the Canadian/US dollar situation is killing profits, and I expect that trend to continue into 2016. TD Bank ranks 35th of 35 stocks in the Conservative Growth Power Rankings. I will try to sell it if it gets to $40. I sold TD from the Growth Portfolio recently. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 35 of 35 |
