Intrinsic value of E*TRADE Financial - ETFC

Previous Close

$44.49

  Intrinsic Value

$96.30

stock screener

  Rating & Target

str. buy

+116%

  Value-price divergence*

-151%

Previous close

$44.49

 
Intrinsic value

$96.30

 
Up/down potential

+116%

 
Rating

str. buy

 
Value-price divergence*

-151%

Our model is not good at valuating stocks of financial companies, such as ETFC.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ETFC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 12.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  41.68
  21.70
  20.03
  18.53
  17.17
  15.96
  14.86
  13.88
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.24
  8.82
  8.44
  8.09
  7.79
  7.51
  7.26
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
Revenue, $m
  1,941
  2,362
  2,835
  3,361
  3,938
  4,566
  5,245
  5,972
  6,748
  7,571
  8,439
  9,352
  10,310
  11,312
  12,358
  13,448
  14,582
  15,763
  16,990
  18,265
  19,591
  20,968
  22,399
  23,888
  25,436
  27,046
  28,723
  30,469
  32,288
  34,185
  36,163
Variable operating expenses, $m
 
  2,155
  2,539
  2,966
  3,434
  3,944
  4,495
  5,086
  5,716
  6,384
  7,089
  7,593
  8,371
  9,184
  10,033
  10,918
  11,839
  12,798
  13,794
  14,830
  15,906
  17,024
  18,186
  19,394
  20,651
  21,959
  23,320
  24,738
  26,215
  27,755
  29,361
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,103
  2,155
  2,539
  2,966
  3,434
  3,944
  4,495
  5,086
  5,716
  6,384
  7,089
  7,593
  8,371
  9,184
  10,033
  10,918
  11,839
  12,798
  13,794
  14,830
  15,906
  17,024
  18,186
  19,394
  20,651
  21,959
  23,320
  24,738
  26,215
  27,755
  29,361
Operating income, $m
  838
  207
  296
  395
  504
  622
  750
  886
  1,032
  1,187
  1,350
  1,759
  1,939
  2,128
  2,325
  2,530
  2,743
  2,965
  3,196
  3,436
  3,685
  3,944
  4,213
  4,493
  4,785
  5,087
  5,403
  5,731
  6,074
  6,430
  6,802
EBITDA, $m
  1,077
  500
  600
  711
  833
  966
  1,109
  1,263
  1,427
  1,601
  1,785
  1,978
  2,180
  2,392
  2,613
  2,844
  3,084
  3,333
  3,593
  3,863
  4,143
  4,434
  4,737
  5,051
  5,379
  5,719
  6,074
  6,443
  6,828
  7,229
  7,647
Interest expense (income), $m
  77
  1,039
  1,320
  1,652
  2,020
  2,425
  2,866
  3,342
  3,853
  4,397
  4,974
  5,584
  6,224
  6,896
  7,599
  8,333
  9,098
  9,894
  10,722
  11,583
  12,478
  13,408
  14,374
  15,379
  16,423
  17,509
  18,639
  19,815
  21,040
  22,317
  23,648
Earnings before tax, $m
  838
  -831
  -1,024
  -1,257
  -1,517
  -1,804
  -2,117
  -2,456
  -2,821
  -3,210
  -3,624
  -3,824
  -4,285
  -4,769
  -5,275
  -5,803
  -6,355
  -6,929
  -7,526
  -8,147
  -8,793
  -9,464
  -10,161
  -10,885
  -11,638
  -12,422
  -13,236
  -14,084
  -14,967
  -15,887
  -16,845
Tax expense, $m
  286
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  552
  -831
  -1,024
  -1,257
  -1,517
  -1,804
  -2,117
  -2,456
  -2,821
  -3,210
  -3,624
  -3,824
  -4,285
  -4,769
  -5,275
  -5,803
  -6,355
  -6,929
  -7,526
  -8,147
  -8,793
  -9,464
  -10,161
  -10,885
  -11,638
  -12,422
  -13,236
  -14,084
  -14,967
  -15,887
  -16,845

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,410
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  48,999
  54,935
  65,938
  78,155
  91,577
  106,190
  121,971
  138,895
  156,934
  176,062
  196,256
  217,497
  239,770
  263,067
  287,388
  312,737
  339,126
  366,577
  395,116
  424,775
  455,597
  487,626
  520,918
  555,531
  591,530
  628,986
  667,976
  708,583
  750,893
  795,000
  841,004
Adjusted assets (=assets-cash), $m
  45,589
  54,935
  65,938
  78,155
  91,577
  106,190
  121,971
  138,895
  156,934
  176,062
  196,256
  217,497
  239,770
  263,067
  287,388
  312,737
  339,126
  366,577
  395,116
  424,775
  455,597
  487,626
  520,918
  555,531
  591,530
  628,986
  667,976
  708,583
  750,893
  795,000
  841,004
Revenue / Adjusted assets
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
Average production assets, $m
  485
  591
  709
  840
  984
  1,142
  1,311
  1,493
  1,687
  1,893
  2,110
  2,338
  2,578
  2,828
  3,089
  3,362
  3,646
  3,941
  4,247
  4,566
  4,898
  5,242
  5,600
  5,972
  6,359
  6,762
  7,181
  7,617
  8,072
  8,546
  9,041
Working capital, $m
  0
  1,181
  1,418
  1,680
  1,969
  2,283
  2,622
  2,986
  3,374
  3,785
  4,220
  4,676
  5,155
  5,656
  6,179
  6,724
  7,291
  7,881
  8,495
  9,133
  9,795
  10,484
  11,200
  11,944
  12,718
  13,523
  14,361
  15,235
  16,144
  17,093
  18,082
Total debt, $m
  33,085
  37,712
  47,197
  57,727
  69,298
  81,894
  95,497
  110,085
  125,635
  142,123
  159,531
  177,840
  197,040
  217,122
  238,086
  259,937
  282,685
  306,348
  330,948
  356,514
  383,082
  410,692
  439,389
  469,226
  500,257
  532,544
  566,154
  601,156
  637,628
  675,648
  715,303
Total liabilities, $m
  42,727
  47,354
  56,839
  67,369
  78,940
  91,536
  105,139
  119,727
  135,277
  151,765
  169,173
  187,482
  206,682
  226,764
  247,728
  269,579
  292,327
  315,990
  340,590
  366,156
  392,724
  420,334
  449,031
  478,868
  509,899
  542,186
  575,796
  610,798
  647,270
  685,290
  724,945
Total equity, $m
  6,272
  7,581
  9,099
  10,785
  12,638
  14,654
  16,832
  19,167
  21,657
  24,297
  27,083
  30,015
  33,088
  36,303
  39,660
  43,158
  46,799
  50,588
  54,526
  58,619
  62,872
  67,292
  71,887
  76,663
  81,631
  86,800
  92,181
  97,784
  103,623
  109,710
  116,059
Total liabilities and equity, $m
  48,999
  54,935
  65,938
  78,154
  91,578
  106,190
  121,971
  138,894
  156,934
  176,062
  196,256
  217,497
  239,770
  263,067
  287,388
  312,737
  339,126
  366,578
  395,116
  424,775
  455,596
  487,626
  520,918
  555,531
  591,530
  628,986
  667,977
  708,582
  750,893
  795,000
  841,004
Debt-to-equity ratio
  5.275
  4.970
  5.190
  5.350
  5.480
  5.590
  5.670
  5.740
  5.800
  5.850
  5.890
  5.930
  5.950
  5.980
  6.000
  6.020
  6.040
  6.060
  6.070
  6.080
  6.090
  6.100
  6.110
  6.120
  6.130
  6.140
  6.140
  6.150
  6.150
  6.160
  6.160
Adjusted equity ratio
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  552
  -831
  -1,024
  -1,257
  -1,517
  -1,804
  -2,117
  -2,456
  -2,821
  -3,210
  -3,624
  -3,824
  -4,285
  -4,769
  -5,275
  -5,803
  -6,355
  -6,929
  -7,526
  -8,147
  -8,793
  -9,464
  -10,161
  -10,885
  -11,638
  -12,422
  -13,236
  -14,084
  -14,967
  -15,887
  -16,845
Depreciation, amort., depletion, $m
  239
  292
  303
  316
  329
  344
  360
  377
  395
  414
  434
  219
  241
  264
  289
  314
  341
  368
  397
  427
  458
  490
  523
  558
  594
  632
  671
  712
  754
  799
  845
Funds from operations, $m
  2,350
  -539
  -720
  -941
  -1,188
  -1,460
  -1,757
  -2,079
  -2,426
  -2,796
  -3,190
  -3,606
  -4,044
  -4,504
  -4,986
  -5,489
  -6,014
  -6,561
  -7,129
  -7,721
  -8,335
  -8,974
  -9,637
  -10,327
  -11,044
  -11,790
  -12,565
  -13,372
  -14,213
  -15,088
  -16,000
Change in working capital, $m
  725
  211
  237
  263
  289
  314
  339
  364
  388
  411
  434
  457
  479
  501
  523
  545
  567
  590
  614
  638
  663
  689
  716
  744
  774
  805
  838
  873
  910
  948
  989
Cash from operations, $m
  1,625
  -750
  -957
  -1,204
  -1,476
  -1,774
  -2,096
  -2,443
  -2,814
  -3,208
  -3,624
  -4,063
  -4,523
  -5,005
  -5,509
  -6,034
  -6,581
  -7,151
  -7,743
  -8,358
  -8,998
  -9,663
  -10,353
  -11,071
  -11,818
  -12,595
  -13,403
  -14,245
  -15,122
  -16,036
  -16,989
Maintenance CAPEX, $m
  0
  -45
  -55
  -66
  -79
  -92
  -107
  -123
  -140
  -158
  -177
  -197
  -219
  -241
  -264
  -289
  -314
  -341
  -368
  -397
  -427
  -458
  -490
  -523
  -558
  -594
  -632
  -671
  -712
  -754
  -799
New CAPEX, $m
  -75
  -106
  -118
  -131
  -144
  -157
  -170
  -182
  -194
  -206
  -217
  -228
  -239
  -250
  -261
  -272
  -284
  -295
  -307
  -319
  -331
  -344
  -358
  -372
  -387
  -403
  -419
  -437
  -455
  -474
  -495
Cash from investing activities, $m
  -4,004
  -151
  -173
  -197
  -223
  -249
  -277
  -305
  -334
  -364
  -394
  -425
  -458
  -491
  -525
  -561
  -598
  -636
  -675
  -716
  -758
  -802
  -848
  -895
  -945
  -997
  -1,051
  -1,108
  -1,167
  -1,228
  -1,294
Free cash flow, $m
  -2,379
  -901
  -1,130
  -1,401
  -1,699
  -2,023
  -2,373
  -2,748
  -3,147
  -3,571
  -4,018
  -4,488
  -4,981
  -5,497
  -6,035
  -6,596
  -7,179
  -7,787
  -8,418
  -9,074
  -9,756
  -10,465
  -11,201
  -11,967
  -12,763
  -13,592
  -14,454
  -15,353
  -16,289
  -17,265
  -18,283
Issuance/(repayment) of debt, $m
  2,237
  8,037
  9,485
  10,531
  11,570
  12,596
  13,603
  14,588
  15,550
  16,489
  17,407
  18,309
  19,199
  20,082
  20,964
  21,851
  22,748
  23,663
  24,600
  25,567
  26,568
  27,610
  28,697
  29,836
  31,031
  32,287
  33,610
  35,003
  36,471
  38,021
  39,655
Issuance/(repurchase) of shares, $m
  -52
  2,140
  2,542
  2,943
  3,369
  3,820
  4,295
  4,791
  5,310
  5,850
  6,411
  6,756
  7,359
  7,984
  8,631
  9,302
  9,997
  10,717
  11,465
  12,240
  13,046
  13,884
  14,755
  15,662
  16,606
  17,590
  18,617
  19,688
  20,806
  21,974
  23,194
Cash from financing (excl. dividends), $m  
  2,096
  10,177
  12,027
  13,474
  14,939
  16,416
  17,898
  19,379
  20,860
  22,339
  23,818
  25,065
  26,558
  28,066
  29,595
  31,153
  32,745
  34,380
  36,065
  37,807
  39,614
  41,494
  43,452
  45,498
  47,637
  49,877
  52,227
  54,691
  57,277
  59,995
  62,849
Total cash flow (excl. dividends), $m
  -283
  9,276
  10,897
  12,072
  13,240
  14,393
  15,525
  16,632
  17,712
  18,768
  19,800
  20,577
  21,577
  22,569
  23,560
  24,557
  25,565
  26,593
  27,647
  28,733
  29,858
  31,029
  32,251
  33,531
  34,874
  36,286
  37,772
  39,338
  40,988
  42,729
  44,566
Retained Cash Flow (-), $m
  -473
  -2,140
  -2,542
  -2,943
  -3,369
  -3,820
  -4,295
  -4,791
  -5,310
  -5,850
  -6,411
  -6,756
  -7,359
  -7,984
  -8,631
  -9,302
  -9,997
  -10,717
  -11,465
  -12,240
  -13,046
  -13,884
  -14,755
  -15,662
  -16,606
  -17,590
  -18,617
  -19,688
  -20,806
  -21,974
  -23,194
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,136
  8,355
  9,129
  9,871
  10,573
  11,230
  11,840
  12,402
  12,918
  13,389
  13,821
  14,218
  14,586
  14,929
  15,255
  15,569
  15,876
  16,182
  16,492
  16,812
  17,145
  17,496
  17,869
  18,268
  18,695
  19,155
  19,650
  20,182
  20,756
  21,372
Discount rate, %
 
  12.30
  12.92
  13.56
  14.24
  14.95
  15.70
  16.48
  17.31
  18.17
  19.08
  20.04
  21.04
  22.09
  23.19
  24.35
  25.57
  26.85
  28.19
  29.60
  31.08
  32.64
  34.27
  35.98
  37.78
  39.67
  41.65
  43.73
  45.92
  48.22
  50.63
PV of cash for distribution, $m
 
  6,354
  6,553
  6,234
  5,796
  5,268
  4,682
  4,069
  3,459
  2,874
  2,335
  1,854
  1,438
  1,089
  805
  580
  407
  279
  185
  120
  75
  46
  27
  15
  8
  4
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  85.1
  72.7
  62.4
  53.8
  46.6
  40.5
  35.4
  31.0
  27.2
  24.0
  21.3
  18.9
  16.8
  15.0
  13.4
  12.0
  10.7
  9.6
  8.6
  7.7
  6.9
  6.2
  5.6
  5.1
  4.6
  4.1
  3.7
  3.3
  3.0
  2.7

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.

FINANCIAL RATIOS  of  E*TRADE Financial (ETFC)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 6.3
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 7.9
Growth Rates
Sales Growth Rate 41.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.1%
Cap. Spend. - 3 Yr. Gr. Rate 9.8%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 22.4%
Total Debt to Equity 527.5%
Interest Coverage 12
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 6.6%
Asset Turnover 0
Profitability Ratios
Gross Margin 94.6%
Gross Margin - 3 Yr. Avg. 94%
EBITDA Margin 59.5%
EBITDA Margin - 3 Yr. Avg. 56.6%
Operating Margin 43.2%
Oper. Margin - 3 Yr. Avg. 25.4%
Pre-Tax Margin 43.2%
Pre-Tax Margin - 3 Yr. Avg. 25.4%
Net Profit Margin 28.4%
Net Profit Margin - 3 Yr. Avg. 21.7%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. -41.7%
Payout Ratio 0%

ETFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ETFC stock intrinsic value calculation we used $1941 million for the last fiscal year's total revenue generated by E*TRADE Financial. The default revenue input number comes from 2016 income statement of E*TRADE Financial. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ETFC stock valuation model: a) initial revenue growth rate of 21.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.3%, whose default value for ETFC is calculated based on our internal credit rating of E*TRADE Financial, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of E*TRADE Financial.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ETFC stock the variable cost ratio is equal to 93.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ETFC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for E*TRADE Financial.

Corporate tax rate of 27% is the nominal tax rate for E*TRADE Financial. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ETFC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ETFC are equal to 25%.

Life of production assets of 10.7 years is the average useful life of capital assets used in E*TRADE Financial operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ETFC is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6272 million for E*TRADE Financial - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 275.627 million for E*TRADE Financial is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of E*TRADE Financial at the current share price and the inputted number of shares is $12.3 billion.

RELATED COMPANIES Price Int.Val. Rating
SCHW Charles Schwab 44.47 97.33  str.buy
AMTD TD Ameritrade 47.77 110.92  str.buy
GCAP GAIN Capital H 6.32 14.03  str.buy
IBKR Interactive Br 47.72 169.01  str.buy
RJF Raymond James 85.64 472.69  str.buy
LTS Ladenburg Thal 2.90 0.94  str.sell
LPLA LPL Financial 53.00 35.08  sell

COMPANY NEWS

▶ Charles Schwab Q3 Revenue Misses Forecasts; Stock Stays In Buy Zone   [Oct-16-17 04:05PM  Investor's Business Daily]
▶ Understanding E*TRADEs Non-Interest Expenses   [10:40AM  Market Realist]
▶ Behind E*TRADEs Fees and Service Charges   [09:10AM  Market Realist]
▶ E*TRADEs Net Revenues Rose in 1H17Heres Why   [07:43AM  Market Realist]
▶ E*TRADE to Host Education Day in Chicago   [Oct-13-17 08:05AM  Business Wire]
▶ E*Trade Financial At Upper End Of Buy Zone With Earnings Due   [Oct-10-17 03:00AM  Investor's Business Daily]
▶ Bank Of America Breaks Down The Brokerage Sector   [Oct-09-17 04:11PM  Benzinga]
▶ E*TRADE to Host Education Day in New York City   [Oct-04-17 04:05PM  Business Wire]
▶ Brokerage Stocks Near Buy Points; Micron Due: Investing Action Plan   [Sep-25-17 04:24PM  Investor's Business Daily]
▶ Understanding TD Ameritrades Valuations   [07:38AM  Market Realist]
▶ A Look at E*TRADEs Valuations in 2Q17   [Sep-13-17 10:37AM  Market Realist]
▶ E*TRADEs Commission Revenues Fell in 2Q17   [07:38AM  Market Realist]
▶ Whats behind Charles Schwabs Fair Valuations?   [07:36AM  Market Realist]
▶ TD Ameritrade Witnessed Rise in Fee-Based Revenues   [Sep-12-17 01:05PM  Market Realist]
▶ Why TD Ameritrades Net Revenues Rose   [11:36AM  Market Realist]
▶ Why Charles Schwabs Total Expenses Rose   [09:06AM  Market Realist]
▶ Why Charles Schwabs Investor Services Net Revenues Rose   [Sep-11-17 10:36AM  Market Realist]
▶ E*TRADE to Host Education Day in Boston   [Aug-30-17 08:05AM  Business Wire]
▶ E-Trade Adds To Commission-Free ETF Suite   [Aug-11-17 08:43AM  Benzinga]
▶ Retail investors wait this long to dive into IPOs   [Jul-30-17 12:10PM  MarketWatch]
▶ E-Trade tops Street 2Q forecasts   [Jul-20-17 09:16PM  Associated Press]
▶ TD Ameritrade Stock Breaks Out As Q3 Beats; Schwab Meets   [Jul-18-17 04:07PM  Investor's Business Daily]
▶ Stocks Close Higher; E-Trade Hits Buy Point But Tesla Skids   [Jul-05-17 04:14PM  Investor's Business Daily]
▶ Four Online Brokers Are In Or Near Buy Zone Right Now   [04:04PM  Investor's Business Daily]
▶ [$$] E*Trade, in Bid to Survive, Returns to Its Roots   [Jul-01-17 12:34AM  The Wall Street Journal]
Financial statements of ETFC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.