Shares of Toronto-Dominion Bank (TSX:TD) have delivered market-beating returns to long-term shareholders. Since April 1995, TD Bank stock has returned 1,820%. Moreover, if we adjust for dividend reinvestments, cumulative returns are closer to 5,480%. It means a $1,000 investment in TD stock three decades back would be worth close to $56,000 today.
Despite these outsized gains, the TSX stock is down 22% from all-time highs. So, let’s see if you should buy the TSX bank stock while it’s below $85.
Is TD Bank stock a good buy in 2025?
TD Bank is making significant progress on its balance sheet repositioning and strategic review while navigating economic uncertainty caused by U.S. tariffs. The bank’s new chief executive officer (CEO), Raymond Chun, is leading a comprehensive strategic review process that is approximately two-thirds complete.
The review focuses on four key areas: capital allocation across business lines, simplifying the portfolio, investing in growth capabilities, and restructuring the bank’s cost base.
The recent sale of TD’s stake in Charles Schwab generated approximately $15 billion in capital, with $8 billion allocated to share buybacks and the remainder reserved for strategic initiatives. The Canadian bank has initiated its buyback program and expects to repurchase up to 100 million shares over the next 12 months.
While focusing on organic growth, TD has categorically ruled out near-term acquisitions, with Chun stating that mergers and acquisitions (M&A) would be too distracting. At the same time, the bank is prioritizing remediating anti-money laundering (AML) issues. TD has budgeted approximately $500 million annually for 2024 and 2025 for AML remediation, with expenses expected to normalize in 2027.
In its U.S. operations, TD is making substantial progress in repositioning its balance sheet. The bank has created approximately $40 billion in buffer space below its $434 billion asset cap and completed a bond repositioning program, which is expected to generate $300 million to $ 500 million in additional net interest income.
Chief Financial Officer Kelvin Tran acknowledged that newly imposed tariffs between the U.S. and Canada would create economic headwinds but expressed confidence in the bank’s ability to manage through this period. TD has observed customers taking a “wait-and-see approach,” with some pausing investment decisions amid the uncertainty.
What is the target price for TD Bank stock?
Despite a challenging environment, TD’s business momentum remains strong. The wholesale banking division achieved a record $2 billion in quarterly revenue in the fiscal first quarter (Q1) (ended in January), following the integration of Cowen. Meanwhile, the wealth management business posted record earnings, with a return on equity nearly double that of its closest competitor.
In Canadian personal and commercial banking, which generates approximately 70% of TD’s earnings, the bank continues to see growth opportunities through deepening relationships with its 14 million clients.
TD maintains a strong capital position with a CET1 (common equity tier-one) ratio target of approximately 13%. Executives hinted at potential additional share repurchases following the conclusion of the strategic review if excess capital remains available.
TD stock trades at a forward price-to-earnings multiple of 10.7, which is lower than its 11.1 times multiple over the past decade. Bay Street expects adjusted earnings per share to expand from $7.78 per share in fiscal 2025 to $9.43 per share in 2027.
Analysts remain bullish on TD stock and expect it to increase by 8.5% over the next 12 months, based on consensus price targets. If we include the dividend payout, total returns could be closer to 13%.
