Justin Sullivan
Summary
- In my last article, I mentioned 3 key metrics to track for Charles Schwab. In this piece, I review these metrics after the March quarter results and commentary.
- Outlook commentary was positive despite adverse movement in net new purchased money market fund flows.
- Bank Deposit Account balances continue to fall.
- Core net new assets are growing very strongly.
- Since early April, 1-yr fwd PEs have already re-rated sharply by +28.6%, and I believe the stock prices are yet to follow; my valuation estimate implies a 35.6% upside.
Reviewing My Thesis After Q1 FY23
In my last article on Charles Schwab (NYSE:SCHW), I stated a view that recognized the deep 40% discount to the long term valuation multiples of the stock, but still required proof of operating traction in 3 key metrics:
- A fall in net new purchased money market flows to measure the degree of the cash sorting movements that are margin headwinds
- Stabilization of falling bank deposit account balances to track renewal of confidence in a key cash revenue stream
- Growth in core net new assets as a bonus kicker on top of the already resilient trends, which would signal customers’ confidence in Charles Schwab
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