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Lots of Good Things Going on at TD Bank

 

Stock (Symbol)

TD Bank (TD)

Stock Price

$57

Sector
Financial
Data is as of
October 22, 2017
Expected to Report
Nov 25
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. 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. TD is also an online financial services firm. Source: Thomson Financial
Sharek’s Take
David SharekToronto-Dominion, better known as TD Bank (TD), is Canada’s 2nd largest bank with a concentration in Southern Canada and the eastern US. The stock has been a good one this year as both its Canadian and U.S. banks are doing well. Additionally, the company just closed on its acquisition of Scottrade, which will boost the brokerage business. TD Bank is big on FinTech, with the highest number of mobile banking 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. Historically, this stock has had a P/E of 14. Like year after year. But even after a run-up from $45 to $57 in a year, the P/E is still just 12. That’s due to profit growth and big increases in profit estimates. 2017 estimates have jumped from $3.91 to $3.92, $4.16 and $4.40 the last 4 qtrs. 2018’s have increased from $4.18 to $4.65 during that span. A lot of that has to do with higher oil prices and currency fluctuations going TD’s way. But still, I like that the Canadian business is better as that had been a drag on profit growth in past years. Overall this is a safe stock with a 4% yield that has grown 4% a year the past ten-years. I feel the stock growth will be better going forward, and analysts have a robust Est. LTG of 10% a year on the stock. Personally, I would take 6% stock growth with a 4% yield, and I think that’s a more realistic expectation for this conservative holding.
One Year Chart
Nice one year chart, great profit growth last qtr. TD has whipped profit estimates the last two qtrs and estimates have gotten a boost each time TD reported. Qtrly profit Estimates are for 17%, 16%, 8% and 0% growth the next four qtrs. I feel growth could settle down three qtrs from now as comparisons get tougher. The Est. LTG of 10% a year for me seems too high, I feel 6% to 7% would be more appropriate. The P/E of 12 makes the stock cheap.
Fair Value
For much of the past decade this stock had a P/E of 14, and with profits growing in the double-digits that seems to be a fair valuation. I think TD will continue on its current uptrend, and perhaps catch up on some lost time.
Bottom Line
TD Bank like many banks has had a tough decade. But now everything seems to be going in TD’s favor: good economy here and in Canada, rising interest rates, low chargeoffs, and an influx of growth from Scottrade. Although the stock has been on a rise, the P/E of 12 is still very low, and I think the bank stocks will go on a multi-year run higher. TD ranks 17th of 32 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

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

17 of 32

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