Is Now the Time to Buy Toronto-Dominion Bank?

Toronto-Dominion Bank’s (TSX:TD)(NYSE:TD) stock has taken a hit since reporting fourth-quarter earnings. Should you be a buyer on the weakness?

| More on:

Toronto-Dominion Bank (TSX: TD)(NYSE: TD), the largest bank in Canada by assets, announced fourth-quarter earnings on December 4, with the results coming in mixed compared to analysts’ expectations, and its stock has reacted by falling more than 4.5% in the trading sessions since.

The company’s stock now sits nearly 7% below its 52-week high, so let’s take a closer look at the results to determine if we should consider using this weakness as a long-term buying opportunity or if we should look elsewhere for an investment today.

The mixed fourth-quarter results

Here’s a chart of TD Bank’s fourth-quarter earnings per share and revenue results compared to what analysts had expected and its actual results in the same period a year ago.

Metric Reported Expected Year-Ago
Earnings Per Share $0.98 $1.05 $0.95
Revenue $7.45 billion $7.02 billion $7.00 billion

Source: Financial Times

TD Bank’s earnings per share increased 3.2% and its revenue increased 6.4% compared to the year-ago period, driven by net income increasing 8% to $1.75 billion, led by growth of 31.1% in its Wholesale Banking segment, 13.6% growth in its U.S. Retail segment, and 5.4% growth in its Canadian Retail segment. The company also achieved revenue growth in all three of its major business segments, including 7% growth in the Canadian Retail segment, 4.2% growth in the U.S. Retail segment, and 0.2% growth in the Wholesale Banking segment.

Here are six other highly important statistics and updates from the report:

  • Total assets increased 9.6% to $944.74 billion compared to $862.02 billion in the year-ago period.
  • Total loans increased 7.6% to $478.91 billion compared to $444.92 billion billion in the year-ago period.
  • Total deposits increased 10.9% to $600.72 billion compared to $541.61 billion in the year-ago period.
  • Efficiency ratio of 56.2% compared to 55.4% in the year-ago period.
  • Return on common equity of 14.0% compared to 15.1% in the year-ago period.
  • Book value per share increased 12.3% to $28.45 compared to $25.33 in the year-ago period.

Should you go long TD Bank today?

TD Bank is the largest bank in Canada by assets and the growing demand for its loans, wealth management services, and other banking products led it to a strong financial performance in the fourth quarter. The company reported growth on both the top and bottom lines, while achieving revenue and net income growth in all three of its major business segments, but its stock has responded by falling more than 4.5% in the trading days since the release.

I do not think this sell-off is warranted, but I do think it has led to a long-term buying opportunity, because the stock now trades at very inexpensive valuations, including just 11.9 times fiscal 2015’s earnings estimates, only 11 times fiscal 2016’s earnings estimates, and only 1.9 times its book value per share, and it has the added buffer of a 3.5% dividend yield. With all of this information in mind, I think investors should strongly consider initiating long-term positions today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Bank Stocks

consider the options
Bank Stocks

Is TD Bank Stock the Best Bank Stock for You?

TD Bank stock is reflecting a lot of the negative news. It remains a top bank stock trading at attractive…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Prediction: These 2 Canadian Bank Stocks Are Next in Line to Pop

National Bank of Canada (TSX:NA) and another bank stock look ready to roar higher in the second half of 2024.

Read more »

analyze data
Bank Stocks

Should You Load Up on TD Bank Stock?

TD Bank (TSX:TD) stock has bounced back a bit since its recent lows, but the best may be on the…

Read more »

Businessperson's Hand Putting Coin In Piggybank
Stocks for Beginners

3 Dividend Stocks Every Investor Should Own

Heading into earnings season, which bank stocks are best for dividend income?

Read more »

stock research, analyze data
Bank Stocks

Should Investors Buy the Correction in TD Stock?

TD stock is down more than 25% from the 2022 high. Is it finally time to buy?

Read more »

Bank Stocks

Could Royal Bank Stock Reach $200?

Growing rate cut hopes and improving analysts’ expectations from Royal Bank’s financial results could help its stock maintain strong upward…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Bank Stocks

1 of the Best Dividend-Paying Bank Stocks to Buy Now and Hold Forever

Here’s a very reliable, dividend-paying Canadian bank stock you can buy at a bargain right now and hold for the…

Read more »

Prospects for TD Bank stock
Bank Stocks

TD Bank in Hot Water: An ‘Exceptional’ Opportunity

Is TD Bank stock a buy after its money-laundering regulatory problems?

Read more »