Toronto-Dominion Bank (TSX:TD) released its fiscal third-quarter earnings yesterday, revealing results that widely exceeded analyst expectations. Despite the wide beat, the bank’s stock sold off after the earnings came out, possibly due to profit-taking by long-term holders. In any case, there was little in the release that pointed to the company becoming less valuable than it appeared to be before the release came out.
It could be that on Thursday, investors simply sold TD stock to take profits. It has been one of the best-performing bank stocks of 2025, after all — and one of the best-performing Canadian large caps, period. However, this stellar performance may have left some investors feeling like it was time to lock in their gains. As a result, TD stock fell a whopping 4.5% on good earnings on Thursday.
Seeing this happening, I decided to add to my TD stock position. I’d accumulated a decent number of shares at the beginning of the year and achieved above-market returns as a result. I wish I’d bought more, and Thursday’s selloff gave me the opportunity to do just that — albeit at a higher price. In this article, I’ll explain why I doubled down on TD stock yesterday, and why I may do the same if the stock continues going down today.
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Earnings recap
TD Bank delivered a strong third-quarter earnings performance, boasting the following metrics:
- $15.6 billion in revenue, up 3.14% year over year.
- $3.8 billion in net interest income, up 6.5%.
- $1.89 in reported earnings per share, up from a negative figure in the year-ago period.
- $2.20 in adjusted earnings per share, up 7.3%.
- $703 million in wealth management earnings, up 63%.
- An 11.3% return on equity.
- A 16.5 common equity tier-one ratio.
- An 18.4 total capital ratio.
- A 4.6 leverage ratio.
Overall, it was a solid quarter. The bank beat on both revenue and earnings, and delivered impressive capital ratios (two feats not easy for a bank to achieve in one quarter). So, my opinion about TD Bank improved because of its recent earnings release.
Valuation
As a result of its post-earnings stock price decline, as well as the earnings growth revealed in the release, TD stock has become cheaper than it had been prior to the release. At Thursday’s closing price, it traded at the following:
- 13.7 times adjusted earnings.
- 10.9 times reported earnings.
- A 0.17 price-to-earnings-to-growth (PEG) ratio.
- 2.95 times sales.
- 1.48 times book value.
Overall, it’s a pretty good value considering the high growth and margins.
Foolish takeaway
Despite putting out good earnings yesterday, TD Bank nevertheless crashed in the subsequent trading. The reaction appeared to have been irrational, so I doubled down on my position. Perhaps the market’s reaction was just profit-taking, or perhaps there was something in the fundamentals that I missed. I read the earnings release pretty thoroughly, though, and I didn’t see anything less than stellar. So, I’m quite happy to be holding TD stock today. In fact, I’m happy having it as my largest portfolio position.
