Charles Schwab stock has delivered a 66.8% return over the past three years, and the current checks suggest the shares may still be pricing in less than the company’s full intrinsic value based on the Excess Returns model. At the same time, traditional earnings multiples point to a level that looks about right rather than deeply discounted.

• A 66.8% gain over three years puts Charles Schwab in focus for investors asking whether recent strength has already captured most of the opportunity.
• Recent records in revenue and client assets, alongside new offerings such as direct Bitcoin and Ethereum trading for retail investors, can support higher intrinsic value. However, any disappointment in client activity or trading volumes may weigh on what investors are prepared to pay.
• On Simply Wall St’s broader checks, Charles Schwab screens as undervalued in 5 of 6 valuation areas. This leans toward the shares looking cheap across several different lenses.

The issue now is whether the current share price of US$104.47 still leaves enough upside against the intrinsic value estimate to interest investors after such a strong three year run.

Is Charles Schwab Still Cheap on Excess Returns?

The Excess Returns model evaluates how efficiently Charles Schwab converts shareholder equity into earnings above its cost of capital. For Schwab, the key input is an average Return on Equity of 23.32%, which the model converts into a stable earnings figure of $7.45 per share on a stable book value base of $31.96 per share.

With book value at $28.88 per share and a calculated cost of equity of $2.62 per share, the model estimates excess return of $4.83 per share. That feeds into an intrinsic value estimate of $135.86 per share, compared with the current share price of $104.47. On this framework, Charles Schwab screens as about 23.1% undervalued. The recent record $7.1 billion quarterly revenue and higher trading activity help explain why the Excess Returns model supports an intrinsic value that is meaningfully above the current trading price.

On the Excess Returns view, Charles Schwab stock appears undervalued relative to its estimated intrinsic value.

Our Excess Returns analysis suggests Charles Schwab is undervalued by 23.1%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Is Charles Schwab Fairly Priced on Earnings?

The P/E ratio is a useful lens for Charles Schwab because earnings remain a central driver of how investors value large, established financial companies. On this measure, Charles Schwab trades at about 18.7x earnings, compared with a peer average of 27.0x in the Capital Markets group and an industry average that sits even higher. That headline gap might look like a clear discount at first glance.

The Fair Ratio, which reflects what investors might typically pay for Charles Schwab given its size, margins and risk profile, is about 19.7x. The current 18.7x P/E is only slightly below that level, so the model does not flag the stock as particularly cheap or expensive despite the wider gap to the simple industry and peer averages. Investors comparing Charles Schwab to the rest of the sector may want to see the P/E as broadly aligned with what the fundamentals currently justify rather than a strong bargain signal on its own.

On the P/E view, Charles Schwab looks priced roughly in line with what this model suggests is a fair earnings multiple.

The Charles Schwab Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Charles Schwab sit on the Community page and focus on the gap between the current share price and what different models imply. They spell out what would need to happen to Charles Schwab's growth, margins and earnings for the stock to be worth materially more or less than today. Where a single ratio or model gives one number, Narratives unpack the future behind that figure so you can track whether it still holds.

Community views on Charles Schwab sit far apart, with some readers focused on long term compounding potential and others on valuation risk and rising costs.

Bull case: 15% undervalued

"Schwab’s core strength has always been structural rather than flashy, with a model that blends brokerage, asset management, advisory services, and banking..."

Bear case: 12% overvalued

"Heavy investment in AI, technology and new platforms such as spot crypto could overshoot sustainable demand, leading to structurally higher run-rate spending..."

Do you think there's more to the story for Charles Schwab? Head over to our Community to see what others are saying!

The Bottom Line

For Charles Schwab, the Excess Returns intrinsic value estimate points to undervaluation, while the earnings multiple sits close to what the tailored fair P/E implies. That means the gap between price and intrinsic value rests less on simple comparables and more on how sustainably Schwab can turn its equity base into returns above its cost of capital. The crux for you as an investor is whether recent business momentum and client activity can support those returns over time or whether higher spending and competition cap what the market is willing to pay.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.