Can Ameritrade Buyback Enough Stock? (AMTD)

TD AMERITRADE Holding Corporation (NASDAQ: AMTD) is seeing a gain today after it announced a buyback plan of up to 30 million shares of common stock.  When you consider its 576 million shares outstanding and a share price of $16.90, this would come to about $507 million in total based on a static of today’s price or would come to 5.2% of the outstanding shares.

The company noted that repurchases of its common stock at current share prices continues to be “an attractive use of capital, providing additional value for our shareholders.”  What is interesting is that, at least on a 52-week trading range of $14.72 to $21.30, $16.90 looks neither expensive nor at a deep sale price.

Calculating the net tangible book value depends upon its cash balance at the time.  The good news is that the net tangible book value is positive.  It is just far less than its total shareholder equity.

If the company buys on dips, if more dips come, then it can achieve the goals intended.  Unfortunately, the flip side is that it might just be overpaying or it might just be paying fair market value.

Financial stocks trade with lower forward earnings multiples than in the past.  Thomson Reuters has estimates of $1.03 EPS for 2010 and $1.22 EPS for 2011.  That generates forward P/E ratios of 16.4 for 2010 and 13.85 for 2011.  That might not be overly expensive, but it doesn’t exactly sound incredibly cheap during The New Normal either.

Shares are up 2.8% at $16.90

JON C. OGG