Dueling PE Ratios: Basket Case E*Trade vs. Most Popular Stock on the Planet – Go Figure
E*Trade (ETFC) is a business disaster, a summary of much of what’s gone wrong in the financial system. Best known as an online broker, E*Trade made some big, bad mortgage bets and almost went under in 2007. Chicago billionaire Ken Griffin stepped in, and his hedge fund Citadel (through an affiliate) made a $2.5 billion cash infusion, but four years later Griffin seemed to regret it. He sent a letter to the E*Trade board in which he said it had “squandered” the franchise and pushed for a sale of the company. Instead the board added two new board members, made former president and chief of TD Waterhouse Frank Petrilli chairman, and let the stock keep sliding downhill:
After net revenues slid again last quarter –- down 13% from $517.6 million to $452.4 million, the board acted. The company abruptly ousted its CEO, Steven Freiberg, and a Wall Street Journal report, quoting JMP Securities analyst David Trone, indicated “the board could be warming up to the idea of a sale.”
Interesting, as who would buy it? TD Ameritrade (AMTD)? Charles Schwab (SCHW)? Capital One (COF)? E*Trade is currently selling for 14.52 times earnings. It has roughly the same PE as another company that seems to be in a vastly better position:
So if you’re an investor, you get a choice. Buy a troubled broker or Apple (AAPL), the most successful tech company on the planet.