E*TRADE is a financial services company providing brokerage and related products and services primarily to individual retail investors.
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$24.90||6%||7.4%||-5.3%|
|BV including aggregate dividends||7.2%||7.6%||-5.2%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
E*TRADE Financial Corporation is a financial company. Financial companies, by their nature, typically have high debt to equity leverage, which is not a meaningful analytical metric. We suggest you use the equity to assets ratio instead.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On August 16, 1996, a Registration Statement on Form S-1 (No. 333-05525) was declared effective by the Securities and Exchange Commission, pursuant to which 5,026,550 shares of the Company's Common Stock were offered and sold for the account of the Company at a price of $10.50 per share, generating gross offering proceeds of $52,779,000 for the account of the Company. A further 675,450 shares of the Company's Common Stock were offered and sold for the account of selling stockholders at a price of $10.50 per share, generating gross offering proceeds of $7,092,000 for the account of selling stockholders.
On July 9, 1998, the Company entered into an agreement to issue and sell 62,600,000 shares of its common stock to SOFTBANK CORP., for an aggregate purchase price of $400 million.
On July 30, 1998, the Company acquired ShareData, Inc. ShareData supplies stock plan knowledge-based software for pre-IPO and public companies. The Company issued 5.2 million shares of its common stock in exchange for all outstanding common stock of ShareData. The Company also assumed all outstanding ShareData options, which were converted to options to purchase approximately 744,000 shares of the Company's common stock. The acquisition was accounted for as a pooling of interests, and accordingly, all prior financial data of the Company has been restated to include the historical operations of ShareData. As a result of the acquisition, the combined Company incurred charges and direct transaction costs relating to the business combination of $1.2 million. These non-recurring costs have been charged to operations in the fourth quarter of fiscal 1998. Prior to the acquisition, ShareData reported on a calendar year end. Fiscal 1998 and 1997 include the results of ShareData for the twelve months ended September 30, 1998 and 1997, respectively. Fiscal 1996 includes the results of ShareData for the twelve months ended December 31, 1996. The results of operations for the quarter ended December 31, 1996 (revenues of $4,637,000 and net income of $746,000), included in both fiscal 1997 and 1996, is reflected as an adjustment to retained earnings in fiscal 1997. No adjustments were required to conform accounting policies of the entities. There were no significant intercompany transactions requiring elimination for any periods presented.
On April 30, 1999, the Company acquired ClearStation, Inc., a financial media Web site that integrates technical and fundamental analysis and discussion for investors. The Company issued 939,000 shares of common stock in exchange for all outstanding common stock of ClearStation. The Company also assumed all outstanding ClearStation options, which were converted to options to purchase approximately 112,000 shares of the Company's common stock. The acquisition was accounted for as a pooling of interests, and accordingly, all prior financial data of the Company has been restated to include the historical operations of ClearStation from October 1997 (the date of ClearStation's inception). No adjustments were required to conform accounting policies of the entities. There were no significant intercompany transactions requiring elimination for any periods presented.
On August 31, 1999, the Company acquired TIR (Holdings) Limited, an international financial services company offering global multi-currency securities execution and settlement services, and a leader in providing independent research to institutional investors. The Company issued 4,488,000 shares of common stock in exchange for all outstanding common stock of TIR. The Company also assumed all outstanding TIR options, which were converted to options to purchase approximately 190,000 shares of the Company's common stock. The acquisition was accounted for as a pooling of interests and, accordingly, all prior financial data of the Company has been restated to include the historical operations of TIR. No adjustments were required to conform accounting policies of the entities. There were no significant intercompany transactions requiring elimination for any periods presented.
On September 30, 1999, the Company acquired Confluent, Inc. by issuing 314,000 shares of the Company's common stock, with a value of $7,421,000. In addition, if Confluent achieves certain operating milestones, its shareowners will be eligible for up to 225,000 additional shares of the Company's common stock. The excess of the purchase price over the fair value of the net tangible assets of Confluent as of September 30, 1999 has been attributed to internal-use software and will be depreciated over two years, in accordance with the Company's existing policy. The operating results of Confluent prior to the acquisition were insignificant.
During the quarter ended December 31, 1999, the Company acquired 100% ownership of three of its foreign affiliates, E*TRADE Nordic AB, a Swedish company, E*TRADE @ Net Bourse S.A., a French company, and the remaining portion of its E*TRADE UK joint venture, for an aggregate purchase price of $362 million. The purchase price was composed of 11.7 million shares of the Company's common stock, cash of $26.7 million and the assumption of options of the affiliates. The purchase price exceeded the fair value of the assets acquired by $357 million, which was recorded as goodwill to be amortized over 20 years.
On January 12, 2000, the Company completed the merger of Telebanc Financial Corporation ("Telebanc"). Telebanc is the holding company for Telebank, the nation's largest pure-play internet bank. Under the terms of the agreement, Telebanc shareowners received 1.05 shares of E*TRADE common stock for each share of Telebanc common stock representing a total of 35.6 million E*TRADE shares.
On August 28, 2000, the Company completed the acquisition of VERSUS, a Canadian-based provider of electronic securities trading services for institutional and retail investors and owner of the E*TRADE Canada license, in a share exchange. Prior to the acquisition, VERSUS had been a strategic partner of E*TRADE, holding the rights to the E*TRADE Canada license since 1997. Through the acquisition of VERSUS, the Company will increase its retail and institutional client base and be able to incorporate the technology underlying the VERSUS Network, a scalable proprietary electronic trading platform, into its global cross-border trading platform. Each VERSUS shareowner received approximately .725 shares of E*TRADE common stock or .725 shares of EGI Canada Corporation that are exchangeable on a one-for-one basis for common stock of E*TRADE (the Exchangeable Shares see Note 16). Options held by VERSUS employees were assumed by E*TRADE and, upon exercise, are convertible into approximately .725 shares of E*TRADE common stock. In total, 10,644,223 Exchangeable Shares were authorized for issuance in an exchange valued at approximately $173.9 million. The acquisition was accounted for as a pooling of interests, and accordingly, the historical consolidated financial statements of the Company have been restated to include the financial position, results of operations, and cash flows of VERSUS for all periods presented. No significant adjustments were made to conform the consolidated financial statements of VERSUS from accounting principles generally accepted in Canada to accounting principles generally accepted in the United States of America or to conform the accounting policies of the entities. All intercompany transactions related to the licensing arrangement between E*TRADE and VERSUS and the prior investment in VERSUS by E*TRADE have been eliminated in all periods presented.
In February 2001, the Company acquired LoansDirect, Inc., an on-line distribution mortgage originator, for $34.5 million.
In June 2001, the Company acquired Web Street, Inc., a provider of online brokerage services, for $44.2 million.
In October 2001, the Company acquired Dempsey & Company, LLC, a privately-held specialist and market-making firm, for $173.4 million.
In 2005, the Company issued $718.4 million or 41.1 million shares of common stock including $691.8 million sold in conjunction with the funding of our BrownCo acquisition.
During the month of May 2008, the Company issued the remaining 46.7 million shares of common stock in accordance with the terms of the agreement with Citadel Limited Partnership ("Citadel"). No additional cash was received by the Company in connection with this share issuance as the cash for these shares was part of the $2.5 billion cash infusion in November 2007.
We raised $63 million in net proceeds from our equity drawdown program launched in May 2009 (the "Equity Drawdown Program") in which a total of 41 million shares of common stock were issued;
We raised $523 million in net proceeds from a public offering of our common stock in June 2009 (the "Public Equity Offering") in which a total of 500 million shares of common stock were issued;
During the three months ended March 31, 2010, $60.8 million of the Company's convertible debentures were converted into 58.8 million shares of common stock.
On May 4, 2010, the Company completed a secondary offering by affiliates of Citadel Investment Group of 172 million shares of its common stock at a public offering price of $1.75 per share. The Company did not issue any shares to the public nor did it receive any proceeds from this offering. All of the shares sold were held by affiliates of Citadel Investment Group.
As of May 4, 2010, a total of $1.0 billion of the convertible debentures ($1.0 billion of the Class A convertible debentures and $2.1 million of the Class B convertible debentures) had been converted into 995.9 million shares of common equity. The remaining face value of the convertible debentures as of May 4, 2010 was approximately $711.4 million.
On May 4, 2010, the Company completed a secondary offering by affiliates of Citadel Investment Group of 172 million shares of its common stock at a public offering price of $1.75 per share.
During the quarter, $278.9 million of the convertible debentures were converted into 27.0 million shares of common stock; and On April 29, 2011, Citadel sold 27.5 million shares of the Company's common stock through a secondary offering. As part of and following the offering, Citadel converted $314.1 million in convertible debentures into 30.4 million shares of common stock. A total of $325.1 million in convertible debentures were converted into 31.4 million shares of common stock during the period April 1, 2011 through May 2, 2011.
On September 12, 2016, we completed the acquisition of Aperture New Holdings, Inc., the ultimate parent company of OptionsHouse, an online brokerage, for $725 million. We funded the transaction through the issuance of fixed-to-floating rate non-cumulative perpetual preferred stock for gross proceeds of $400 million, and the remainder with existing corporate cash.