After Record Q3, Analysts Are Bullish on Thinkorswim

Dec.16.08 | About: TD Ameritrade (AMTD)

Thinkorswim Group Inc. (SWIM) posted record revenue and earnings per share in the third-quarter as its online brokerage business boomed. SWIM is cheap - it trades at only 7.9x forward earnings.

Company Description

Thinkorswim provides online brokerage and investor education financial products for self-directed investors and active traders.

The online brokerage segment offers several trading platforms that execute trades in stocks and stock options, index options, futures and futures options, forex, mutual funds and fixed income. Customers include self-directed investors, institutional traders and money managers.

The Investools' Education Group offers a wide range of education products and services that coordinate with the online brokerage platforms.

Record Third Quarter Results

On Oct 30, Thinkorswim Group announced third-quarter earnings that beat Wall Street estimates by 38.10%, or 8 cents a share. Net income rose to $19.6 million from $18.4 million in the third quarter of 2007. Earnings were a record at 29 cents per share compared to 27 cents a year ago.

Revenue surged 10% to a record $98.1 million from $89.3 million in the same period a year ago. 58% of revenue was from the brokerage segment.

Customer assets hit a new record of $3.1 billion with $1.74 billion in client cash and money market funds. Total accounts rose 97% from the year ago quarter and average retail trades per day jumped 94% to 57,300 from third-quarter 2007.

The Investools' Education segment didn't fare as well. Graduates fell 20% to 7,620.

Consensus Estimates Rise for the Full Year

Covering analysts are bullish about thinkorswim with 2 out of 4 analysts raising full-year estimates in the last 30 days. 2008 full-year consensus estimates rose 23% to 97 cents from 79 cents in the last 60 days.

Value Fundamentals

Thinkorswim is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 3 out of 4 quarters by an average of 20.89%.

SWIM is trading at only 7.9x forward earnings. Its price-to-book is 1.83. The company has a stellar 1-year return on equity [ROE] of 36.06%.