Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on The Charles Schwab Corporation (SCHW) on Cosmic Capital’s Substack. In this article, we will summarize the bulls’ thesis on SCHW. The Charles Schwab Corporation (SCHW)'s share was trading at $88.21 as of 9th June. SCHW’s trailing and forward P/E were 26.73 and 20.83 respectively according to Yahoo Finance.
A customer at a teller's desk, demonstrating the company's financial services
Charles Schwab (SCHW) is emerging from a turbulent phase with strong momentum, as underlying fundamentals continue to improve across the board. The resolution of the cash-sorting headwind—a period where clients moved idle cash into higher-yielding alternatives—has allowed Schwab to stabilize its funding base and begin paying down expensive debt. This shift has driven net interest margins back toward 3%, lifting net interest income and revealing significant latent earnings power. With this normalization, Schwab is positioned to deliver EPS growth of over 20% annually, a sharp recovery from prior quarters.
The improving trajectory is already visible: client cash levels are rebounding, NIMs are rising, and capital ratios have strengthened, reinforcing confidence in Schwab’s balance sheet resilience. Meanwhile, new accounts and net new assets—key indicators of organic market share growth—are trending close to target levels after a period of integration-related disruption following the TD Ameritrade acquisition.
This recovery has been supported by buoyant equity markets, which serve as a tailwind for Schwab’s asset-sensitive model. Despite operating in a competitive landscape, Schwab’s scale, brand equity, and client service infrastructure offer structural advantages that enhance its ability to win share and retain clients.
Trading at a forward P/E of 19x, the stock offers compelling value given its accelerating earnings profile. Management appears to have room to outperform expectations, making this a timely entry point for investors seeking a high-quality compounder with improving fundamentals, optionality on rate tailwinds, and renewed momentum. The long-term story is intact, and Schwab appears poised for durable growth.
Previously, we covered a bullish thesis on Morningstar from Flyover Stocks, which highlighted its underappreciated moat in data and analytics, founder-led alignment, and long-term outperformance. With strong recurring revenue, institutional stickiness, and a growing need for transparent financial data, Morningstar remains a steady compounder in a crowded field. Morningstar’s thesis centres on its overlooked moat in proprietary financial data and founder-led stability, while Schwab’s emphasizes a post-crisis earnings rebound driven by interest rate normalization and asset growth.
