We think Charles Schwab (NYSE:SCHW) continues to exhibit a low cost advantage relative to competitors in the financial services industry, with non-interest expenses as a percentage of total client assets of 0.19%, as of the first three quarters of 2012, according to management. This has led to pre-tax profit margins in excess of 30%, which is a multiple of some of the most well established wealth management platforms in the world. We think that this abnormally low expense rate emanates from Schwab's focus on leveraging its information technology infrastructure. In contrast, we think too many of Schwab's rivals rely on more expensive and less efficient human capital to gather assets. The stock continues to trade at a historically low price to book ratio, though that is somewhat offset by a higher forward price to earnings ratio. We think both valuation metrics are somewhat misleading in this historically low interest rate environment and in the event of a rising interest rates, the Company's earnings would likely expand at a very rapid rate, primarily due to money market fund fee waiver relief. So we continue to believe Charles Schwab represents an excellent balance between business quality and valuation.
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC.
Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.