Schwab stock has dropped more than 10% in the last week, and this is a golden buying opportunity.
**What you get:**
* Revenue grew 22% year over year
* EPS grew 50% year over year
* Net Client assets grew 18% year over year, and net new assets also grew
* Almost every major revenue stream grew year over year: Interest, management fees, and trading revenue all grew at double digits, while bank deposit income decreased 1%
* Good capital allocation: Their debt/earnings ratio is just a hair over 0.5, and they bought back $2.5 billion in common stock last year
* Healthy cash pile: They have 46 billion in cash and cash equivalents just sitting there. Their industry requires more cash than most, but they're still sitting pretty
What do you think this should cost? A forward P/E of 30? Maybe even 35? Think again. Their forward P/E is sitting around **16!!** That's an absolute bargain.
So what's the risk? The stock has dropped more than 10% in the last week after Altruist announced an AI-powered wealth/tax advisor. Will that be disruptive? Probably. Will that affect Schwab? I don't think it will very much. I don't want AI telling me how to invest or prepare my taxes, and even if I did I could just ask ChatGPT for free. Schwab also has their own robo-advisors, and it wouldn't be too hard for them to similarly integrate them with AI if that's what their clients actually want. I think a firm like Robinhood is much more exposed to that risk.
I think the biggest short-term risk comes from a wider stock-market crash. If the S&P crashes, people stop investing. If people stop investing, Schwab makes no money. But when isn't that risk present? They have the balance sheet to weather that storm well. I also think they have a relatively small moat, but they're valued as if they have none.
TL,DR: Their [2025 year-end release](https://content.schwab.com/web/retail/public/about-schwab/schwab_q4_2025_earnings_release.pdf) reads like it descended straight from heaven. This is the definition of a great company at a good price. Organic 20% growth on almost all fronts, miniscule debt, and a small mountain of cash to play with however they want.