Intrinsic value of E*TRADE Financial - ETFC

Previous Close

$40.42

  Intrinsic Value

$75.93

stock screener

  Rating & Target

str. buy

+88%

  Value-price divergence*

+211%

Previous close

$40.42

 
Intrinsic value

$75.93

 
Up/down potential

+88%

 
Rating

str. buy

 
Value-price divergence*

+211%

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 10.3

 

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
  17.20
  15.98
  14.88
  13.89
  13.00
  12.20
  11.48
  10.84
  10.25
  9.73
  9.25
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
Revenue, $m
  1,941
  2,275
  2,638
  3,031
  3,452
  3,901
  4,377
  4,880
  5,409
  5,963
  6,543
  7,148
  7,780
  8,437
  9,120
  9,831
  10,569
  11,336
  12,134
  12,963
  13,825
  14,721
  15,653
  16,624
  17,635
  18,689
  19,787
  20,932
  22,127
  23,375
  24,678
Variable operating expenses, $m
 
  2,084
  2,379
  2,698
  3,040
  3,404
  3,791
  4,199
  4,628
  5,078
  5,549
  5,804
  6,316
  6,850
  7,405
  7,981
  8,581
  9,204
  9,852
  10,525
  11,224
  11,952
  12,709
  13,497
  14,318
  15,173
  16,065
  16,995
  17,965
  18,978
  20,036
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
  2,084
  2,379
  2,698
  3,040
  3,404
  3,791
  4,199
  4,628
  5,078
  5,549
  5,804
  6,316
  6,850
  7,405
  7,981
  8,581
  9,204
  9,852
  10,525
  11,224
  11,952
  12,709
  13,497
  14,318
  15,173
  16,065
  16,995
  17,965
  18,978
  20,036
Operating income, $m
  838
  191
  259
  333
  412
  497
  586
  681
  780
  885
  994
  1,345
  1,463
  1,587
  1,716
  1,849
  1,988
  2,132
  2,282
  2,438
  2,600
  2,769
  2,944
  3,127
  3,317
  3,515
  3,722
  3,937
  4,162
  4,397
  4,642
EBITDA, $m
  1,077
  481
  558
  641
  730
  825
  926
  1,032
  1,144
  1,261
  1,384
  1,512
  1,645
  1,784
  1,929
  2,079
  2,235
  2,397
  2,566
  2,741
  2,923
  3,113
  3,310
  3,515
  3,729
  3,952
  4,184
  4,426
  4,679
  4,943
  5,219
Interest expense (income), $m
  77
  1,087
  1,346
  1,615
  1,906
  2,218
  2,550
  2,902
  3,274
  3,666
  4,076
  4,505
  4,953
  5,420
  5,907
  6,413
  6,938
  7,485
  8,053
  8,643
  9,257
  9,894
  10,558
  11,248
  11,966
  12,715
  13,494
  14,307
  15,155
  16,039
  16,963
Earnings before tax, $m
  838
  -897
  -1,087
  -1,282
  -1,493
  -1,721
  -1,963
  -2,221
  -2,494
  -2,781
  -3,082
  -3,161
  -3,490
  -3,833
  -4,191
  -4,563
  -4,950
  -5,353
  -5,770
  -6,205
  -6,656
  -7,125
  -7,613
  -8,121
  -8,649
  -9,199
  -9,772
  -10,370
  -10,993
  -11,642
  -12,321
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
  -897
  -1,087
  -1,282
  -1,493
  -1,721
  -1,963
  -2,221
  -2,494
  -2,781
  -3,082
  -3,161
  -3,490
  -3,833
  -4,191
  -4,563
  -4,950
  -5,353
  -5,770
  -6,205
  -6,656
  -7,125
  -7,613
  -8,121
  -8,649
  -9,199
  -9,772
  -10,370
  -10,993
  -11,642
  -12,321

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
  55,484
  64,351
  73,927
  84,199
  95,148
  106,760
  119,020
  131,916
  145,439
  159,586
  174,353
  189,746
  205,772
  222,441
  239,772
  257,783
  276,500
  295,950
  316,167
  337,186
  359,047
  381,792
  405,469
  430,126
  455,818
  482,601
  510,536
  539,684
  570,114
  601,896
Adjusted assets (=assets-cash), $m
  45,589
  55,484
  64,351
  73,927
  84,199
  95,148
  106,760
  119,020
  131,916
  145,439
  159,586
  174,353
  189,746
  205,772
  222,441
  239,772
  257,783
  276,500
  295,950
  316,167
  337,186
  359,047
  381,792
  405,469
  430,126
  455,818
  482,601
  510,536
  539,684
  570,114
  601,896
Revenue / Adjusted assets
  0.043
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
  0.041
Average production assets, $m
  485
  569
  660
  758
  863
  975
  1,094
  1,220
  1,352
  1,491
  1,636
  1,787
  1,945
  2,109
  2,280
  2,458
  2,642
  2,834
  3,033
  3,241
  3,456
  3,680
  3,913
  4,156
  4,409
  4,672
  4,947
  5,233
  5,532
  5,844
  6,169
Working capital, $m
  0
  1,137
  1,319
  1,516
  1,726
  1,951
  2,189
  2,440
  2,704
  2,982
  3,272
  3,574
  3,890
  4,218
  4,560
  4,915
  5,285
  5,668
  6,067
  6,481
  6,912
  7,360
  7,827
  8,312
  8,818
  9,344
  9,893
  10,466
  11,064
  11,687
  12,339
Total debt, $m
  33,085
  38,463
  46,150
  54,453
  63,358
  72,851
  82,919
  93,548
  104,729
  116,454
  128,719
  141,522
  154,868
  168,762
  183,215
  198,240
  213,856
  230,083
  246,947
  264,475
  282,698
  301,652
  321,372
  341,899
  363,277
  385,553
  408,773
  432,992
  458,264
  484,647
  512,202
Total liabilities, $m
  42,727
  48,105
  55,792
  64,095
  73,000
  82,493
  92,561
  103,190
  114,371
  126,096
  138,361
  151,164
  164,510
  178,404
  192,857
  207,882
  223,498
  239,725
  256,589
  274,117
  292,340
  311,294
  331,014
  351,541
  372,919
  395,195
  418,415
  442,634
  467,906
  494,289
  521,844
Total equity, $m
  6,272
  7,379
  8,559
  9,832
  11,198
  12,655
  14,199
  15,830
  17,545
  19,343
  21,225
  23,189
  25,236
  27,368
  29,585
  31,890
  34,285
  36,774
  39,361
  42,050
  44,846
  47,753
  50,778
  53,927
  57,207
  60,624
  64,186
  67,901
  71,778
  75,825
  80,052
Total liabilities and equity, $m
  48,999
  55,484
  64,351
  73,927
  84,198
  95,148
  106,760
  119,020
  131,916
  145,439
  159,586
  174,353
  189,746
  205,772
  222,442
  239,772
  257,783
  276,499
  295,950
  316,167
  337,186
  359,047
  381,792
  405,468
  430,126
  455,819
  482,601
  510,535
  539,684
  570,114
  601,896
Debt-to-equity ratio
  5.275
  5.210
  5.390
  5.540
  5.660
  5.760
  5.840
  5.910
  5.970
  6.020
  6.060
  6.100
  6.140
  6.170
  6.190
  6.220
  6.240
  6.260
  6.270
  6.290
  6.300
  6.320
  6.330
  6.340
  6.350
  6.360
  6.370
  6.380
  6.380
  6.390
  6.400
Adjusted equity ratio
  0.138
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  552
  -897
  -1,087
  -1,282
  -1,493
  -1,721
  -1,963
  -2,221
  -2,494
  -2,781
  -3,082
  -3,161
  -3,490
  -3,833
  -4,191
  -4,563
  -4,950
  -5,353
  -5,770
  -6,205
  -6,656
  -7,125
  -7,613
  -8,121
  -8,649
  -9,199
  -9,772
  -10,370
  -10,993
  -11,642
  -12,321
Depreciation, amort., depletion, $m
  239
  290
  299
  308
  318
  328
  339
  351
  363
  376
  390
  167
  182
  197
  213
  230
  247
  265
  284
  303
  323
  344
  366
  388
  412
  437
  462
  489
  517
  546
  577
Funds from operations, $m
  2,350
  -606
  -788
  -974
  -1,176
  -1,393
  -1,624
  -1,870
  -2,130
  -2,405
  -2,692
  -2,993
  -3,308
  -3,636
  -3,978
  -4,334
  -4,703
  -5,088
  -5,487
  -5,902
  -6,333
  -6,781
  -7,248
  -7,733
  -8,237
  -8,763
  -9,310
  -9,881
  -10,476
  -11,096
  -11,744
Change in working capital, $m
  725
  167
  182
  196
  211
  224
  238
  251
  264
  277
  290
  303
  316
  329
  342
  355
  369
  384
  399
  414
  431
  448
  466
  485
  505
  527
  549
  573
  598
  624
  652
Cash from operations, $m
  1,625
  -773
  -970
  -1,171
  -1,386
  -1,617
  -1,862
  -2,122
  -2,395
  -2,682
  -2,982
  -3,296
  -3,624
  -3,965
  -4,320
  -4,689
  -5,073
  -5,471
  -5,886
  -6,316
  -6,764
  -7,230
  -7,714
  -8,218
  -8,743
  -9,289
  -9,859
  -10,453
  -11,073
  -11,720
  -12,396
Maintenance CAPEX, $m
  0
  -45
  -53
  -62
  -71
  -81
  -91
  -102
  -114
  -126
  -139
  -153
  -167
  -182
  -197
  -213
  -230
  -247
  -265
  -284
  -303
  -323
  -344
  -366
  -388
  -412
  -437
  -462
  -489
  -517
  -546
New CAPEX, $m
  -75
  -84
  -91
  -98
  -105
  -112
  -119
  -126
  -132
  -139
  -145
  -151
  -158
  -164
  -171
  -178
  -185
  -192
  -199
  -207
  -215
  -224
  -233
  -243
  -253
  -263
  -275
  -286
  -299
  -312
  -326
Cash from investing activities, $m
  -4,004
  -129
  -144
  -160
  -176
  -193
  -210
  -228
  -246
  -265
  -284
  -304
  -325
  -346
  -368
  -391
  -415
  -439
  -464
  -491
  -518
  -547
  -577
  -609
  -641
  -675
  -712
  -748
  -788
  -829
  -872
Free cash flow, $m
  -2,379
  -903
  -1,114
  -1,330
  -1,563
  -1,810
  -2,072
  -2,350
  -2,641
  -2,947
  -3,267
  -3,600
  -3,949
  -4,311
  -4,688
  -5,080
  -5,487
  -5,910
  -6,350
  -6,807
  -7,282
  -7,777
  -8,291
  -8,826
  -9,384
  -9,965
  -10,570
  -11,202
  -11,861
  -12,549
  -13,268
Issuance/(repayment) of debt, $m
  2,237
  7,393
  7,687
  8,303
  8,905
  9,493
  10,067
  10,629
  11,181
  11,725
  12,265
  12,804
  13,346
  13,894
  14,453
  15,025
  15,616
  16,227
  16,864
  17,528
  18,223
  18,953
  19,720
  20,528
  21,378
  22,275
  23,221
  24,219
  25,272
  26,383
  27,555
Issuance/(repurchase) of shares, $m
  -52
  2,004
  2,266
  2,556
  2,860
  3,177
  3,508
  3,852
  4,209
  4,580
  4,964
  5,125
  5,537
  5,965
  6,408
  6,868
  7,346
  7,842
  8,357
  8,894
  9,452
  10,033
  10,638
  11,270
  11,929
  12,616
  13,335
  14,085
  14,869
  15,690
  16,548
Cash from financing (excl. dividends), $m  
  2,096
  9,397
  9,953
  10,859
  11,765
  12,670
  13,575
  14,481
  15,390
  16,305
  17,229
  17,929
  18,883
  19,859
  20,861
  21,893
  22,962
  24,069
  25,221
  26,422
  27,675
  28,986
  30,358
  31,798
  33,307
  34,891
  36,556
  38,304
  40,141
  42,073
  44,103
Total cash flow (excl. dividends), $m
  -283
  8,494
  8,839
  9,528
  10,202
  10,860
  11,503
  12,132
  12,749
  13,358
  13,962
  14,328
  14,934
  15,548
  16,173
  16,814
  17,475
  18,159
  18,871
  19,615
  20,393
  21,209
  22,068
  22,971
  23,923
  24,927
  25,985
  27,102
  28,280
  29,523
  30,835
Retained Cash Flow (-), $m
  -473
  -2,004
  -2,266
  -2,556
  -2,860
  -3,177
  -3,508
  -3,852
  -4,209
  -4,580
  -4,964
  -5,125
  -5,537
  -5,965
  -6,408
  -6,868
  -7,346
  -7,842
  -8,357
  -8,894
  -9,452
  -10,033
  -10,638
  -11,270
  -11,929
  -12,616
  -13,335
  -14,085
  -14,869
  -15,690
  -16,548
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
 
  6,490
  6,573
  6,973
  7,343
  7,683
  7,995
  8,280
  8,540
  8,778
  8,998
  9,203
  9,397
  9,583
  9,765
  9,946
  10,129
  10,317
  10,514
  10,721
  10,941
  11,176
  11,429
  11,701
  11,994
  12,310
  12,651
  13,017
  13,411
  13,834
  14,287
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
 
  5,779
  5,155
  4,761
  4,311
  3,828
  3,333
  2,846
  2,381
  1,953
  1,569
  1,235
  951
  716
  527
  378
  265
  181
  120
  78
  49
  30
  17
  10
  5
  3
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  83.7
  70.5
  59.7
  50.7
  43.2
  37.0
  31.7
  27.3
  23.6
  20.4
  17.8
  15.5
  13.6
  11.9
  10.4
  9.1
  8.0
  7.0
  6.2
  5.4
  4.8
  4.2
  3.7
  3.3
  2.9
  2.5
  2.2
  2.0
  1.7
  1.5

E*TRADE Financial Corporation, a financial services company, provides brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand. It also offers investor-focused banking products, primarily deposits to retail investors; and financial corporate services, such as software and services for managing equity compensation plans to its corporate clients. The company provides its services to customers through digital platforms; and a network of customer service representatives and financial consultants through phone, email, and online at two branches, as well as in person through 30 branches across the United States. The company was incorporated in 1982 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  E*TRADE Financial (ETFC)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 5.7
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 7.1
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 17.2% 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 254.696 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 $10.3 billion.

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LPLA LPL Financial 47.30 54.58  buy

COMPANY NEWS

▶ 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]
▶ [$$] E*Trade, in Bid to Survive, Returns to Its Roots   [Jul-01-17 12:34AM  The Wall Street Journal]
▶ E*Trade Chief Gets Ultimatum   [Jun-30-17 03:09PM  Barrons.com]
▶ [$$] E*Trade, in Bid to Survive, Returns to Its Roots   [08:55AM  The Wall Street Journal]
▶ Dont Get Mad. Get E*TRADE.   [Jun-19-17 12:30PM  Business Wire]
▶ Banks And Financial Stocks: Latest News And Analysis   [Jun-13-17 12:31PM  Investor's Business Daily]
▶ Which Stocks Are Showing Rising Relative Strength?   [Jun-12-17 01:47PM  Investor's Business Daily]
▶ E*Trade Financial Trying To Close In On Key Technical Measure   [12:10PM  Investor's Business Daily]
▶ Who trades options the most? Millennial investors   [May-24-17 01:32PM  MarketWatch]
▶ [$$] OakNorth strengthens board after Lord Adair exit   [May-22-17 07:30AM  Financial Times]
▶ E*TRADE to Host Education Day in Orange County   [May-11-17 04:05PM  Business Wire]
▶ Brokerage pricing battle   [12:39PM  CNBC Videos]
▶ E*Trade: Broker Review for Stock Options   [12:22PM  Motley Fool]
▶ Visa, Hawaiian Holdings, Proofpoint, E-Trade Beat Views Late   [04:41PM  Investor's Business Daily]
▶ E-Trade jumps, Mattel drops on earnings   [04:30PM  CNBC Videos]
▶ E-Trade tops Street 1Q forecasts   [04:22PM  Associated Press]
▶ Charles Schwab Tops Views As Account Openings Hit 17-Year High Amid Price War   [Apr-18-17 04:09PM  Investor's Business Daily]
▶ E*TRADE to Host Education Day in Washington, D.C.   [Apr-11-17 04:05PM  Business Wire]
▶ E*TRADE Takes Major Step to Reinvigorate Iconic Brand   [Apr-03-17 04:05PM  Business Wire]
▶ E*TRADE to Host Education Day in San Francisco   [Mar-31-17 04:05PM  Business Wire]
▶ How to Invest in Stocks for Beginners   [Mar-17-17 02:47PM  Zacks]
Stock chart of ETFC 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.

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