optionsExpress Beats The Big Guys (OXPS)

Apr.24.06 | About: optionsXpress Holdings, (OXPS)

optionsExpress (NASD:OXPS) specializes in offering online customers the ability to trade equity options, stock and bonds. The market is competitive with companies like Schwab and ETrade operating with huge marketing budgets and lots of customers. That has not seemed to cramp the style of the folks over at optionsExpress.

The company's first quarter was a barnburner. Revenue hit $46.4 million, which was up 73% over the same quarter a year ago. Income before taxes rose 82% to $29.6 million. You have to admire a business where 64% of revenue goes to the bottom line. Schwab (NASD:SCHW) said its Q1 pretax margins were 31.2%

optionsExpress also said customer accounts rose to 178,700, 53% ahead of a year ago. Customer assets rose to $4 billion, an 84% lift.

Daily average revenue trades, a critical metric in the online brokerage business rose to 29,400 up from 16,500 a year ago and up from 24,200 in the last quarter of 2005.

optionsExpress did say that advertising expense per new customer account did rise to $111 from $86 a year ago, but customer trades per account rose to 43 from 37. So, the cost to acquire a customer has gone up some, but the trading yield on each account has also gone up.

What's wrong with this picture? Not much. optionsExpress is obviously benefiting from the increase in trader sophistication as investors move from bread-and-butter stock trades to equity options. The growth in revenue and operating income since 2003 has been remarkable and margins have increased, so the model has leverage.

optionsExpress trades near its 52-week high sitting around $32 now, up from a low for the period of $12.48.

No one should be surprised if it goes higher.

OXPS 1-yr Chart


Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.