SCHWAB CHARLES CORP (SCHW): what the price requires

At today's price, SCHWAB CHARLES CORP (SCHW) is priced for +8.6% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/SCHW

Headline

FieldValue
TickerSCHW
CompanySCHWAB CHARLES CORP
Current price$102.44/sh
CompositionInvestor Services 79% / Advisor Services 21%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfee-financial
Implied earnings growth8.6%
Price-to-earnings21.2x
Earnings yield4.7%

A hybrid: a fee franchise alongside a sizeable balance sheet, valued here on the fee annuity.

Solve inputs: computed at a 10% cost of equity with 4% terminal growth over a 5-year stage, on the latest fiscal year's GAAP earnings base; each 1pp of cost of equity moves the implied earnings growth ~4.1pp.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.12σ
cohort percentile (of 49 peers)49

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.51x4expensive
Earnings1.41x4expensive
Relative0.85x4justifies
Growth0.65x2justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$226.530.45xyesFCF base $10.6B, growth 21% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$91.011.13xyesP/E 14.11x (blended: sector 12x + trailing (TTM) 19x), scenarios: 11.5x / 14.1x / 16.7x (bear / base = sector held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$58.141.76xyesBV/sh $28.10, ROE (TTM) 19.1%, ke 9.3%
Two-Stage Excess ReturnAsset$82.661.24xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$119.860.85xyesRev $24.8B, growth 21% (input: historical growth; tapered), Terminal P/S: 5.9x / 7.2x / 8.6x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$176.050.58xyesEPS $5.03, growth 35% (input: historical EPS growth), PEG=0.54 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$80.931.27xyesBV $28.10 + 5yr PV of (ROE (TTM) 19.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$56.401.82xyes√(22.5 × EPS $5.03 × BVPS $28.10) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$73.641.39xyesFCF $9669.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$71.611.43xyesSBC-adj FCF $9.34B (FCF $9.67B − SBC $0.33B) capitalized at Kₑ
Ben Graham FormulaEarnings$162.300.63xyesEPS $5.03 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$42.472.41xyesRevenue $24.80B × sector P/S 3.0x
PEG Fair ValueRelative$188.630.54xyesEPS $5.03 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$54.381.88xyesEPS $5.03 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (buyback)-2.1%

Custody and consolidated-fund balance sheet: deposits, client cash, and fund-level debt are not corporate leverage, and operating cash flow follows client flows. Net-debt, coverage, and cash-burn lenses are suppressed as misleading; share-count CAGR is kept. The fee-earnings read above is the valuation basis.

Bullet Takeaways

Bull Case

Anchor on the one number that, if it changed, would flip the verdict: net new assets. Schwab pulled in a record $158 billion of core net new assets in the quarter and opened 1.3 million new accounts, lifting total client assets to $11.77 trillion, up 19% year over year (web research). That asset-gathering flywheel is the engine under everything else, because Schwab monetizes client assets three ways at once, custody and advice fees, net interest on client cash, and trading. The 10-K describes the model precisely: "by functioning as the custodian, Schwab earns revenue" across "a broad range of wealth services" from securities and funds to bank lending and trust services (accession 0000316709-26-000009). When assets keep flowing in at a record pace, the fee annuity compounds regardless of which monetization line leads in a given quarter.

The scale advantage makes that flywheel hard to dislodge. Schwab is one of the largest custodians and brokers in the country, and scale in this business is a genuine moat: a low cost-per-account lets it offer zero-commission trading and competitive cash yields while still earning a high return, which in turn attracts more assets. The company is also shrinking its share count about 2.1% a year, so per-share earnings grow on top of the asset growth.

The recent results show every monetization line firing at once, and a key headwind fading. First-quarter 2026 revenue rose 16% to $6.5 billion, net income jumped 30% to $2.5 billion, EPS of $1.43 adjusted beat estimates, trading revenue rose 20% on a record 9.9 million daily average trades, and net interest revenue rose 16% on stronger margin and bank lending up 29% (web research). Critically, the cash-sorting drag, clients moving cash from low-yield sweep into higher-yielding products, that pressured Schwab through the rate-hike cycle, has decelerated, which the 10-K notes "further decelerated" with bank sweep deposits actually growing again (accession 0000316709-26-000009). The price implies only about 6.2% fee-earnings growth, a modest bar the firm is clearing comfortably, and at a P/E in the lower half of its peer group the buyer is paying a discount for a franchise compounding client assets at a record clip.

Bear Case

The qualitative vulnerability is that Schwab's earnings are more rate-sensitive than the clean fee-annuity framing suggests, and that is where the price-to-fundamentals tension lives. A large share of revenue comes from net interest earned on client cash, and the firm itself flags that "a significant change in client cash allocations could negatively impact our income" because "client cash balances are a significant funding source for the generation of the Company's revenue" (accession 0000316709-26-000009). When rates fell or clients moved cash into higher-yielding alternatives, the cash-sorting dynamic compressed Schwab's net interest income and forced expensive wholesale funding, the same pressure that hit the stock during the regional-banking stress. The recent deceleration in cash sorting is a tailwind today, but the underlying sensitivity has not gone away: a renewed rate decline or a deposit shift can reverse the net interest line that is currently powering the earnings beat.

Only after that qualitative point do the conservative valuation methods reinforce caution. The relative method at a 12x sector P/E marks $77. The price embeds growth, and if the asset inflows slow or the rate environment turns, those static frames are where the stock gravitates. The forward-looking methods that reach or exceed the price, DCF perpetual growth at $229, Peter Lynch at $176, depend on extrapolating the recent high growth, which is exactly what a rate reversal would interrupt.

The second qualitative risk is competition and the structural pressure on the cash spread. Schwab competes with Fidelity, Vanguard, Morgan Stanley, and a wave of fintech brokers, all fighting for the same client assets, and the long arc of the industry is toward lower fees and higher yields paid on client cash, both of which compress the economics of the custody-and-cash model. The firm is also indirectly exposed to market fluctuations through margin loans and client securities (accession 0000316709-26-000009), so a sharp equity-market drawdown hits trading volumes, margin balances, and asset levels at once. The price near 19x earnings is reasonable for a steady compounder, but it assumes the asset flywheel and the rate environment both stay favorable, and the conservative methods near $54 to $77 are the reminder of where the floor sits if either turns.

Valuation

A capital-light fee business is valued on the fee earnings it generates rather than book value, so the price is read off price-to-earnings. At about 19x earnings, a 5.3% earnings yield, the inversion implies roughly 6.2% annual fee-earnings growth, computed at a 10% cost of equity on the latest fiscal year's GAAP earnings. That implied pace is within Schwab's own record and sits in the lower half of the fee-financial peer group on price-to-earnings, so the assumption is within range. Schwab is explicitly a hybrid, a fee franchise alongside a sizeable bank balance sheet, valued here on the fee annuity where the franchise value sits.

The X-ray clusters around the price on the methods that fit. The relative method marks $77, the two-stage excess-return method $83, residual income $81, and the FCF-yield methods $72 to $74, all reasonably near the $91.70 quote, which is why the characterization says relative-multiple and growth-DCF justify the price. Return on equity of 19.1% against a 9.3% cost of equity drives the excess-return marks above the $28.10 book value. The earnings-power value of $14 is distorted by the bank-style income statement and should be discounted.

The honest read is that the standard frames land close to or above the price, so the buyer is not overpaying for a high-return franchise. The variable that settles it is the dual driver of the model: continued net-new-asset inflows that compound the fee base, and the rate-and-cash environment that governs net interest income. If both stay favorable, the fee-range midpoint near $109 is reasonable; if cash sorting reverses or asset growth slows, the price leans back toward the relative and earnings-yield marks in the $54 to $77 range.

Catalysts

The asset-gathering trend is the dominant catalyst. Schwab reported record core net new assets of $158 billion and 1.3 million new accounts in the quarter, with client assets reaching $11.77 trillion, up 19% year over year (web research). Each quarter's net-new-asset figure is the leading indicator of the fee base that drives every revenue line.

The rate-and-cash dynamic is the second catalyst. Net interest revenue rose 16% on stronger margin and bank lending up 29%, and the cash-sorting drag that pressured prior years has decelerated, with bank sweep deposits growing again (web research, accession 0000316709-26-000009). The direction of client cash allocations and the rate environment is the swing factor for the net interest line.

The trading and capital-return catalysts round it out. Trading revenue rose 20% on a record 9.9 million daily average trades, management signaled EPS tracking above prior $5.70 to $5.80 guidance, and the firm continues to buy back stock (web research). Watch core net new assets, the client-cash and net-interest-margin trend, trading volumes, and the buyback pace, plus any shift in the rate outlook that would move the cash-sorting dynamic.

Sources: Charles Schwab Q1 2026 results and 10-Q (stocktitan.net, sec.gov 8-K, tikr.com); Charles Schwab Q1 2026 earnings (mlq.ai, public.com, quiverquant.com, finance.yahoo.com).

Peer Cohorts (Per Segment, With Filing Citations)

Investor Services (reported)

Advisor Services (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive SCHW report on boothcheck