Charles Schwab (NYSE: SCHW)
stands out as a strong securities brokerage with its latest Q2 2025 report.
With robust revenue growth, expanded margins, and a rising stock that continues
to outpace the broader market, Schwab is making a compelling case for both
long-term investors and value seekers. In this video we will dive into Charles
Schwab recent earnings, stock performance & valuation, growth potential,
and the risks investor should consider.
About Charles Schwab
Founded in 1971 by Charles R.
Schwab, The Charles Schwab Corporation has grown from a pioneering discount
brokerage into one of America’s largest financial services providers.
Headquartered in Westlake, Texas, Schwab offers a full suite of services, retail
and institutional brokerage, wealth management, retirement planning, banking
through Schwab Bank, custody services, trading platforms, and asset management.
Key milestones include the 2020 merger with TD Ameritrade, which significantly
boosted its scale and client base.
Charles Schwab Financial
Performance
Charles Schwab delivered a strong
financial performance in Q2 2025, underscoring its operational efficiency and
growth momentum. The company reported quarterly revenue of $5.85 billion, a 24.75%
increase compared to $4.69 billion in Q2 2024. Earnings per share (EPS) surged
to $1.08, up 63.64% from $0.66 a year earlier, reflecting improved
profitability and scale. On a trailing twelve-month (TTM) basis, revenue
reached $21.62 billion, representing a 16.32% increase from $18.59 billion in
the prior year. TTM EPS climbed to $3.72, up 54.29% from $2.41, indicating
strong earnings growth across a full-year view. The company also maintained
robust margins, with an operating profit margin of 43.66% and a net profit
margin of 33.68%. Efficiency metrics were equally impressive, return on assets
(ROA) stood at 1.57%, while return on equity (ROE) reached 18.08%, suggesting
effective capital utilization. The debt-to-equity ratio of 1.1 shows a balanced
approach to leverage.
Over the past five years, Charles
Schwab's revenue has been growing at a 14.7% CAGR and net income at 19.5%. This
shows that Charles Schwab has been growing fairly consistently in the past.
Charles Schwab Fiscal 2025
Financial Forecast
Looking ahead, analysts forecast
continued momentum, with 2025 revenue expected to hit $23.41 billion, a 19.42%
increase over 2024, and non-GAAP EPS projected at $4.61, reflecting 41.73%
growth. Analysts have assigned a Buy rating, with an average price target of
$106.17, implying an 11.3% upside, and a high target of $126, suggesting
potential gains of 32.12%.
SCHW Stock Price Performance
and Valuation
At the time this article was written, the stock was trading at $95.39 per share, reflecting a 47.3% increase over the past year, far outpacing the S&P 500’s 13.3% gain during the same period. Over the longer term, Schwab has also proven its resilience and growth potential, with a 173% increase over the past five years, compared to the S&P 500’s 96% gain.
Despite this strong performance, SCHW remains attractively
valued. It offers a modest dividend yield of 1.13%, providing income alongside
capital appreciation. From a valuation standpoint, the stock trades at a TTM price-to-sales
(P/S) ratio of 8.12, with a forward P/S of 7.48. Its non-GAAP price-to-earnings
(P/E) ratio is 24.31 and its forward P/E is 20.91.
Based on Fiscal.ai data, if we
look at the valuation over the past five years, the forward P/S is well above
the average, while the forward P/E is slightly below the average. This
indicates that Charles Schwab is currently trading at a fair price and may be
undervalued, as the non-GAAP EPS is projected to grow by 40% this year.
Charles Schwab Growth
Potential
Charles Schwab growth prospect remains
strong, driven by several factors.
- Exceptional Scale and Market
Leadership
Charles Schwab's asset growth trajectory represents one of the most compelling growth factors in the financial services industry. The company's total client assets of $10.76 trillion position it as a dominant force, with an estimated 12-13% share of the U.S. investable wealth market. This massive scale creates significant competitive advantages through economies of scale, enabling Schwab to spread operating costs over a vast client base and invest heavily in technology and client experience.
The company's core net new assets of $80.3 billion in Q2 2025, representing 31% year-over-year growth, demonstrate Schwab's ability to consistently attract and retain client assets. This organic growth rate significantly exceeds the company's long-term target of 5-7% annualized growth, indicating strong momentum in client acquisition and retention. Year-to-date, Schwab has gathered $218 billion in net new assets, up 39% from the prior year, highlighting the sustained nature of this growth trend. - Artificial Intelligence and
Robo-Advisory Expansion
Schwab's investment in artificial intelligence and automated investment services represents another significant avenue for revenue diversification. The company's Schwab Intelligent Portfolios reached $82.1 billion in assets under management with 28% year-over-year growth, demonstrating strong demand for automated investment solutions. The robo-advisory market is expected to reach $1.2 trillion by 2025, providing substantial growth opportunities for well-positioned players like Schwab.
The integration of AI across Schwab's platform extends beyond investment management to include enhanced client service, risk management, and operational efficiency. The Schwab Research Assistant leverages proprietary data to streamline financial planning processes, while AI-driven analytics provide personalized investment recommendations and portfolio optimization. These capabilities enable Schwab to offer sophisticated services at scale while maintaining cost efficiency. - Wealth Management and Advisory
Services Growth
Schwab's wealth management and advisory services represent high-margin revenue streams with significant growth potential. Managed Investing Solutions saw 37% year-over-year growth in net inflows during Q2 2025, while the broader RIA industry that Schwab serves reported strong growth metrics. RIAs using Schwab's platform achieved average compound annual growth rates of 12.6% for assets under management and 12.4% for revenue from 2019 through 2024.
The wealth management opportunity is particularly compelling given demographic trends, including the aging of baby boomers and the wealth transfer to younger generations. Schwab's comprehensive platform positions it to serve clients across multiple life stages and wealth levels, from young professionals just starting to invest to high-net-worth individuals requiring sophisticated estate planning and tax strategies.
Risks to Consider
While Charles Schwab stock looks
attractive, we should be mindful of potential risks.
- Financial and Credit Risk
Schwab faces risks from client defaults, especially related to margin lending, options and futures trading, securities lending, and mortgage lending. Abrupt drops in securities values and liquidity shortages could cause substantial losses. The company’s exposure increases with its acquisition of Ameritrade and its role as counterparty in financial contracts. Inadequate collateral and counterparty failures are key concerns. - Debt, Financing & Banking
Industry Risks
Schwab is sensitive to adverse effects from broader financial sector problems, including disruptions caused by failures like Silicon Valley Bank in 2023. These disruptions can lead to liquidity shortages, higher borrowing costs, and regulatory pressures. New capital requirements being phased in through 2028 will impact Schwab's operations, alongside increased FDIC premiums and potential assessments following banking turmoil. - Interest Rate and Deposit
Risks
Interest rates heavily influence Schwab’s earnings, particularly net interest income (NII). Prolonged low interest rates, like those experienced in Europe or Japan or a recession-driven rate cut could reduce profitability and require business model changes. Additionally, shifts in client cash and deposits affect funding costs and interest-earning asset balances, pressuring earnings. Fee pressure and the transition to passive investment products also present revenue risk
Conclusion
Charles Schwab demonstrates a
strong blend of financial performance, consistent growth, and reasonable
valuation. With impressive earnings momentum, expanding margins, and analyst
forecasts pointing to continued upside, SCHW stands out as a high-quality stock
in the financial sector. Its stock has significantly outperformed the market,
yet still offers room to grow. Supported by a resilient business model and
strategic innovation, Schwab remains a compelling long-term investment
opportunity for those seeking both growth and value in their portfolio.
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