Charles Schwab, Company Summary - Essay Example

Appendix A shows a graph that illustrates the price movement of the stock during the past year. The stock a year ago was price at $13.86. The price of the firm climbed for six months and then it started a downward spiral to reach the current price of $11.54. The graph that illustrates the movement of the SCHW common stock looks similar to the graph of the normal distribution function. The founder and chairman of the company is Charles Schwab. Walt Bettinger is the chief executive officer (CEO) of the company.

The enterprise has 13,200 employees worldwide. The corporate headquarters of the company are located in San Francisco. “Schwab also operates 302 domestic branch offices in 45 states, one branch in Puerto Rico and one branch in London. Hong Kong clients are served through a Schwab subsidiary” (Aboutschwab). The quality of the human resources of the firm has been a critical success factor that has helped the company achieved tremendous growth during the past 40 years. The mission statement of Charles Schwab is to empower individual investors to take control of their financial lives free form the high costs and conflict of traditional brokerage firms (Blogspot).

The financial service industry is a multi-trillion dollar industry. The top three stock exchanges in the United States: NYSE, AMEX, and NASDAQ moved 3899 million shares in 2010 (Plunkett Research). Charles Schwab is a major player in the brokerage industry. The company generated $4.2 billion in revenues in fiscal year 2010. The revenues of the company were 1% higher than in 2009. The firm has a total of 8 million client accounts. The client accounts of Charles Schwab have grown by 14.28% in comparison with 2007.

The net income of the firm was $454 million. The net margin of the firm was 10.80%. The net margin is the firm was better than the industry average. The industry standard net margin is 5.8% (Dun & Bradstreet). The earnings per share (EPS) of Charles Schwab in 2010 was $0.38. The EPS is a metric that tends to influence the market price of the common stock. The return on assets (ROA) of the firm was 0.49%. The ROA industry average is 1.7% (Dun & Bradstreet). Return on assets measures how effective a company has been at generating net profits with its assets.

The ROA of Charles Schwab in 2010 was 1.2% below the industry average. The return on equity (ROE) metric measures how effective a company has been at generating profits from its equity. The ROE of the company was 7.29%. The industry standard ROE is 12.3% (Dun & Bradstreet). The price earnings ratio (P/E) of the company on December 30, 2010 was 45.13. The P/E ratio is calculated by dividing the market share price by the earnings per share. The price earnings ratio shows whether a stock is relatively cheap or relatively expensive in comparison to its current earnings.

There are several competitors that compete directly with Charles Schwab. Five of the top competitors Schwab faces in the marketplace are Merrill Lynch, Scottrade, Morgan Stanley, Ameritrade and ING. One of the things that set apart Charles Schwab from the competition is its brand value. The tremendous brand value of the firm has helped the company maintain high gross margins by charging $29.95 per trade. A lot of online traders receive revenues below $10 a trade. For instance Scottrade charges its customers $7 a trade.

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