Charles Schwab Corp (SCHW), TD Ameritrade Holding Corp. (AMTD): This Brokerage Seems a Bit Pricey

Alternatives: TD Ameritrade and E*Trade

TD Ameritrade Holding Corp. (NYSE:AMTD) is a leading Internet-based discount brokerage and caters to active individual investors. The company has about 6 million client accounts and offers some of the most highly-regarded trading tools in the industry, such as trading platform thinkorswim, which they acquired in 2009. TD Ameritrade Holding Corp. (NYSE:AMTD) seems to be a bit expensive right now at 21.6 times this year’s earnings, which are expected to rise by 10.8% and 14.6% during the next two years.

E TRADE Financial Corporation (NASDAQ:ETFC) is another story altogether. E TRADE Financial Corporation (NASDAQ:ETFC) was hit very hard by the housing market collapse due to its exposure to mortgage loans, an area that its competitors have not ventured into. As a result, the company has not been profitable in years, and the last time an annual profit was reported was in 2006. E TRADE Financial Corporation (NASDAQ:ETFC) does look like it is slowly but surely getting its act together, and the consensus calls for the company to post a profit this year of $0.48 per share. As E TRADE Financial Corporation (NASDAQ:ETFC)’s balance sheet improves, so should its profits, but it is by no means a sure bet for any long-term investment.

Buy, Sell, or Hold?

In the cases of Schwab and TD Ameritrade Holding Corp. (NYSE:AMTD), the stocks seem reasonably valued, but still are a bit expensive when factoring in the risk. After all, these businesses are highly dependent on interest income, and I believe that the anticipation of rate hikes coming sooner rather than later are somewhat priced into these companies and factored into their earnings growth projections. The economy improving to the point of rate increases is far from a done deal, so I would need to see a pullback in these stocks before I would be a buyer of either. E TRADE Financial Corporation (NASDAQ:ETFC), on the other hand, seems fairly valued and may actually have the best risk/reward ratio of the three, but it is still far too risky for anything more than a speculative investment at this point.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends TD Ameritrade. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Brokerage Seems a Bit Pricey originally appeared on Fool.com is written by Matthew Frankel.

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