Is Charles Schwab (SCHW) Attractively Priced After Recent Share Price Weakness

• If you are wondering whether Charles Schwab is reasonably priced at its current level, this article walks through the numbers so you can judge the value for yourself.
• The stock last closed at US$93.08, with a 7 day return of 6.2% decline, a 30 day return of 10.3% decline, a year to date return of 8.4% decline, and a 1 year return of 15.6%, 3 year return of 21.7% and 5 year return of 58.6%.
• Recent headlines around Charles Schwab have focused on its role as a major US brokerage and bank, as well as how investors view its position in a higher rate setting. This backdrop has helped shape expectations around its earnings power, interest rate sensitivity and client asset trends. All of these factors sit in the background when the market reacts to the share price.
• On our checks, Charles Schwab scores 4 out of 6 on valuation, which you can see in more detail through its valuation score. Next we will look at how methods like P/E multiples and discounted cash flow assess the stock, before finishing with a different way to think about valuation that can add extra context to the raw numbers.

Charles Schwab delivered 15.6% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Charles Schwab Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to generate above the return required by its shareholders, then converts that into a per share value.

For Charles Schwab, the starting point is its book value of $23.85 per share and an average return on equity of 21.13%. Analysts estimate stable earnings of $6.59 per share, based on weighted future return on equity inputs from 7 analysts. The model applies a cost of equity of $2.65 per share, which implies excess return of $3.93 per share that is attributed to the company earning more than the required rate on its equity base.

The analysis also uses a stable book value estimate of $31.18 per share, sourced from weighted future book value estimates from 6 analysts. Combining these inputs, the Excess Returns model arrives at an intrinsic value of about $108.22 per share, which is around 14.0% above the recent share price of $93.08. On this measure, the shares screen as undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests Charles Schwab is undervalued by 14.0%. Track this in your watchlist or portfolio, or discover 56 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Charles Schwab.

Approach 2: Charles Schwab Price vs Earnings

For a profitable company like Charles Schwab, the P/E ratio is a useful way to think about value because it links what you pay per share to the earnings the business is already generating. In general, higher expected growth and lower perceived risk tend to support a higher P/E, while slower expected growth or higher risk usually point to a lower, more cautious P/E range.

Charles Schwab currently trades on a P/E of 19.65x. This sits below the Capital Markets industry average P/E of 23.10x and also below the peer average of 20.60x. To add more context, Simply Wall St calculates a proprietary “Fair Ratio” for the stock of 19.01x. This is designed to reflect the P/E you might expect given factors such as earnings growth estimates, profit margins, risk profile, industry and market cap.

Because the Fair Ratio incorporates these company specific drivers, it can be more informative than a simple comparison with peers or the broader industry that may have different risk and growth profiles. With the current P/E of 19.65x only modestly above the Fair Ratio of 19.01x, the shares appear slightly expensive on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Charles Schwab Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which let you write a simple story about Charles Schwab, link that story to specific assumptions for future revenue, earnings, margins and fair value, and then compare that fair value with today’s price. All of this is available within Simply Wall St’s Community page, where millions of investors can set up their own view that updates automatically as news or earnings arrive. One investor might anchor on a higher fair value near US$140.82 with faster revenue growth and higher future earnings, while another might lean toward a lower fair value near US$88.00 with more cautious assumptions. Each of those perspectives becomes a clear, numbers backed reference point for deciding whether the current price of about US$93.08 looks attractive, stretched or somewhere in between.

For Charles Schwab, however, we will make it really easy for you with previews of two leading Charles Schwab Narratives:

🐂 Charles Schwab Bull Case

Fair value in this narrative: US$122.76 per share

Implied discount vs recent price: about 24.1% undervalued

Revenue growth assumption: 10.76%

• Positions Schwab as a large-scale brokerage and banking platform built around multiple revenue streams from trading, asset management, advisory services and banking.
• Emphasises the importance of long-term client relationships, sticky client assets and the role of Schwab as a default platform for investors over time.
• Views the current setup as more cautious than optimistic, with the potential for sentiment to improve if earnings hold up and conditions remain manageable.

🐻 Charles Schwab Bear Case

Fair value in this narrative: US$88.00 per share

Implied premium vs recent price: about 5.8% overvalued

Revenue growth assumption: 9.23%

• Highlights the risk that higher spending on AI, technology and new products like spot crypto could raise ongoing costs and weigh on margins.
• Flags sensitivity to trading activity, margin balances and lending, with concerns that strong current conditions may not persist.
• Anchors on a lower fair value of US$88.00, tied to more cautious assumptions on future earnings, valuation multiples and how the market may price Schwab by 2028.

If you want to see how other investors are framing the same numbers into clear stories, you can review the full range of Charles Schwab Narratives and decide which assumptions line up closest with your own view.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there's more to the story for Charles Schwab? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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