Why The Charles Schwab Corporation (SCHW) is a Top Value Stock for the Long-Term

Investors seeking a balance between value and growth characteristics often find themselves navigating a complex landscape of valuation metrics, earnings momentum, and macroeconomic risks. The Charles Schwab Corporation (SCHW) emerges as a compelling case study in this regard, offering a rare combination of undervaluation, strong earnings revisions, and strategic capital allocation. While concerns about overvaluation persist in broader markets-particularly in the tech sector-SCHW's fundamentals suggest it is well-positioned to deliver long-term returns without the speculative risks associated with high-multiple stocks.

A Strong Foundation: Zacks' Value and VGM Scores

SCHW's appeal begins with its Zacks Value Score of B, which signals undervaluation based on metrics like its forward price-to-earnings (P/E) ratio of 20.87. This score places the stock in the top 20% of value opportunities, making it a magnet for investors prioritizing price-to-earnings, price-to-book, and other traditional value metrics. Complementing this is its A VGM (Value, Growth, and Momentum) Score, which highlights its ability to satisfy all three pillars of a balanced investment strategy. The VGM framework, developed by Zacks, identifies stocks that combine low valuations with strong earnings growth and positive momentum-a rare trifecta in today's market.

Earnings Momentum and Strategic Shareholder Returns

Recent financial results underscore SCHW's operational strength. For the third quarter of 2025, the company reported $6.1 billion in net revenues, a 27% year-over-year increase. Adjusted earnings per share (EPS) surged 70% to $1.31, driven by cost discipline and revenue diversification according to the company's financial report. These figures are not just impressive in isolation; they also validate the upward revisions in analyst expectations. Over the past 30 days, SCHW's Zacks Earnings ESP (Earnings Surprise Predictor) has seen a 2.39% upward revision, suggesting a high probability of outperforming earnings estimates based on independent analysis.

Moreover, Schwab's commitment to shareholder returns is evident in its aggressive stock repurchase program. During Q3 2025, the company repurchased 28.9 million shares for $2.7 billion, signaling confidence in its intrinsic value. This capital allocation strategy not only boosts earnings per share but also aligns management incentives with long-term investors.

Valuation Realism in a High-Multiple Market

Critics may argue that SCHW's forward P/E of 20.87 is elevated compared to historical averages. However, this metric must be contextualized against the broader market. The "Magnificent Seven" tech stocks, for instance, trade at an average forward P/E of 26.8x and an enterprise value-to-sales (EV/sales) multiple of 6.1x according to Zacks analysis. While these multiples have drawn comparisons to the 2000 tech bubble, SCHW's valuation remains significantly more grounded. Its earnings growth and operational leverage-unlike many speculative tech stocks-justify a premium to traditional value benchmarks.

Further, independent analyses suggest Schwab's stock is undervalued by approximately 25% or more, based on its earnings power and balance sheet strength. This discrepancy between intrinsic value and market price creates a margin of safety for long-term investors, particularly as Schwab continues to expand its wealth management and digital brokerage platforms.

Addressing Overvaluation Concerns

The broader market's focus on high-growth tech stocks has led to a narrative of overvaluation, but SCHW's fundamentals tell a different story. Unlike speculative assets, Schwab's revenue streams are diversified across fee-based services, asset management, and trading commissions-businesses that are less sensitive to interest rate fluctuations and macroeconomic volatility. Additionally, its recent 4.86% stock price gain in July 2025, driven by an average daily trading volume of 7 million shares, reflects institutional confidence in its long-term trajectory. Analysts have further reinforced this optimism, with Piper Sandler upgrading its price target from $80.00 to $92.00 in July 2025, implying a 15% upside.

Conclusion: A Balanced Long-Term Play

The Charles Schwab Corporation exemplifies the ideal blend of value and growth. Its Zacks Value and VGM Scores highlight its undervaluation and earnings momentum, while its recent financial performance and strategic capital allocation reinforce its long-term appeal. In a market where many high-multiple stocks lack the fundamentals to justify their valuations, SCHW stands out as a disciplined, cash-generative business with a clear path to sustainable growth. For investors seeking to balance risk and reward, Schwab offers a rare opportunity to participate in both value appreciation and earnings-driven returns.