TD Ameritrade Holding Corp. (AMTD), E TRADE Financial Corporation (ETFC): Is This Investment Brokerage Unstoppable?

TD Ameritrade vs. peers

TD Ameritrade caters to retail traders as well as Registered Investment Advisors. Its trading platforms include web platform (alerts, screeners, customizable workspace), trade architect (streaming news and opportunity identification), thinkorswim (in-depth analytical resources), and mobile (streaming market commentary on mobile devices). As stated above, revenue declined in 2012, but the recent performance has been strong.

Both TD Ameritrade and Charles Schwab Corp (NYSE:SCHW) have demonstrated quality debt management, sporting debt-to-equity ratios of 0.3 and 0.2, respectively. E TRADE Financial Corporation (NASDAQ:ETFC), a brokerage products and services provider, owns a debt-to-equity ratio of 1.6.

Companies with quality debt management and strong cash positions have an advantage if a bear market presents itself. These companies have the ability to increase their dividends or offer share buybacks in order to attract more investor interest. Companies like E TRADE Financial Corporation (NASDAQ:ETFC) don’t have such a luxury as it will be busy paying down debt.

Even if debt doesn’t concern you, E TRADE Financial Corporation (NASDAQ:ETFC)’s revenue has now declined four years in a row, and it has only delivered a profit in one of the past five years. On the other hand, a couple of insiders have been buying E TRADE Financial Corporation (NASDAQ:ETFC) shares — and making money.

Conclusion

E TRADE Financial Corporation (NASDAQ:ETFC) has performed poorly during one of the biggest bull runs in history, debt is a burden, and there is no dividend yield. However, insider buying is a positive sign. Overall, E TRADE Financial Corporation (NASDAQ:ETFC) should only be considered as a highly speculative play.

If you’re looking for the best upside potential out of the three aforementioned companies, then it would be TD Ameritrade, but that’s only if the broader market performs well. If you’re looking for steady gains as well as the most resiliency in bear markets, then consider Charles Schwab Corp (NYSE:SCHW). With $34 billion in cash, many options are available for returning more capital to shareholders if necessary. It should also be noted that TD Ameritrade currently yields 1.5%, and Charles Schwab Corp (NYSE:SCHW) yields 1.2%.

The article Is This Investment Brokerage Unstoppable? originally appeared on Fool.com is written by Dan Moskowitz.

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

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