Kit, Wow, it is hard to compare these two goofusly valued cos. Chuckie is the more stable of the two as they have a huge book of business that comes in via the no load mutual fund network. One would think that even after the crash, what remains will stay in money funds at SCH. However, there is no way a co. the size of SCH can grow into its pe multiple, or, to make Jim Kelly happy, produce a discounted rate of return to shareholders that would make it a reasonable buy as an operating co. at even half the current price. Even the bulls are saying 25-30% growth and effectively no dividend, which cannot justify a PE ratio of 100 times trailing eps. And that 25-30% growth only happens if this best of all markets continues.
Ameritrade, as opposed to SCH, does have a chance to grow into its multiple because it is small. A very slim chance that depends upon the market staying in mania mode and this firm making every decision correctly. But I give it no chance in the real world. The stock is selling for more than 100 times the estimate for 2000. They lost money last year. Nutso. And, unlike SCH, we have real bankruptcy potential here. There is no big fund network that keeps kicking in fees when the BK hits. And, the web site was not working for much of today. As a customer, I know this well. I wanted to place trades with them and had to use my other brokers.
So, I see SCH as a POS that will probably survive at much lower valuation levels, but has no chance of achieving a growth rate they need to be fairly valued. I see AMTD as a POS that will probably go under during the next five years, though, unlike SCH, it has a one in a million shot at growing to the Moon. |
