Charles Schwab's Scalable Business Model Poised For Accelerated Growth

In a report published Friday, Keefe, Bruyette & Woods analyst Joel Jeffrey said that Charles Schwab Corp's (NASDAQ: SCHW) Winter Business Update on Thursday focused on the "scalability" of the firm's operations and financials.

"Charles Schwab has generated strong asset and revenue growth over the past three years despite the headwinds of a low interest rate environment and they believe that they are now poised to see even greater growth rates as interest rates improve," Jeffrey wrote.

In the note, Jefferies speculated the Fed Funds rate will see a 25 basis point hike in September, which will result in an $0.08 boost in the company's earnings per share. The analyst added that higher rates remain "vital" to Charles Schwab's business and financial growth as the impact from higher rates will generate additional capital that will allow the company to continue growing its balance sheet and enhance its earnings per share.

However, despite the company being "one of the best-positioned" stocks to benefit from an increase in short-term rates, the analyst wrote that shares are currently trading at approximately 25.5x 2015 earnings per share estimate ($1.13) and 20x discounted earnings per share estimate ($1.66) and within seven percent of his $32 price target. As such, shares were maintained with a Market Perform rating.