Charles Schwab's Stock Valuation: Can Historical Strength Sustain Long-Term Growth?

Charles Schwab Corporation (SCHW) has long been a cornerstone of the financial services industry, celebrated for its client-centric approach and disciplined capital allocation. As of October 2025, the stock trades at a trailing P/E ratio of 25.14, slightly above its 10-year average of 23.8, reflecting the FullRatio P/E analysis. Recent earnings and revenue growth have outpaced expectations. But does this historical performance justify a bullish outlook for long-term investors?

Recent Performance: A Catalyst for Optimism

Charles Schwab's Q2 2025 results underscore its resilience and adaptability. Net revenues surged 25% year-over-year to $5.85 billion, driven by a 31% increase in core net new assets ($80.3 billion) and a 14% rise in total client assets to $10.76 trillion, according to Charles Schwab's Q2 2025 earnings release. GAAP earnings per share (EPS) reached $1.08, with adjusted EPS at $1.14-both exceeding analyst estimates, per Investing.com. This performance reflects Schwab's ability to capitalize on market volatility and client demand for diversified wealth management solutions.

Analysts have taken notice. Citizens reiterated a "Market Outperform" rating in September 2025, setting a $110.00 price target, while projections suggest EPS could climb from $4.22 to $5.21 in the next year-a 23.5% increase, according to MarketBeat. These forecasts imply that Schwab's growth trajectory is not a one-off but part of a broader trend.

Historical Context: Balancing Strength and Caution

Over the past decade, Schwab has demonstrated robust revenue growth, averaging 14.03% annually from 2018 to 2024, as noted in the company's Q2 2025 earnings release. However, earnings per share (EPS) growth has been more uneven. While 2024 EPS rose 17.7% year-over-year to $2.99, the five-year average EPS growth rate stands at just 2.2%. This disparity highlights a key challenge: Schwab's revenue expansion has not consistently translated into proportional profit growth.

The company's P/E ratio, currently 25.14, sits above its 10-year average and significantly higher than the Financial Services sector's 14.43. This premium valuation suggests investors are pricing in future growth rather than current earnings. For context, Schwab's P/E peaked at 31.66 in 2015 during a period of low interest rates and market optimism, but it has since normalized. The current level, while elevated, remains within historical bounds and aligns with forward-looking analyst projections.

Valuation and Risk Factors

Schwab's valuation must be evaluated alongside its capital return strategy and competitive positioning. In Q2 2025, the company returned $2.8 billion to shareholders via buybacks and preferred redemptions, signaling confidence in its cash flow stability. Additionally, Schwab's Advisor Services segment has become a critical growth driver, contributing to diversified revenue streams and reducing reliance on market-driven trading commissions.

However, risks persist. The financial services sector remains sensitive to interest rate fluctuations and regulatory shifts. Schwab's EPS growth has lagged its revenue gains, partly due to reinvestment in technology and client acquisition. While this strategy strengthens long-term competitiveness, it may temper near-term profit margins.

Conclusion: A Case for Strategic Bullishness

Charles Schwab's stock valuation reflects a delicate balance between historical performance and future potential. The company's 25% revenue growth in Q2 2025, coupled with a strong client asset base and disciplined capital returns, supports a bullish case. However, the elevated P/E ratio and moderate EPS growth over the past five years necessitate caution.

For long-term investors, Schwab's position as a market leader in wealth management and its ability to adapt to evolving client needs remain compelling. Analysts' confidence in a 23.5% EPS increase over the next year further reinforces the argument that Schwab's valuation is justified by its growth trajectory. That said, investors should monitor macroeconomic risks and ensure Schwab's reinvestment strategy continues to drive sustainable profitability.

In the end, Schwab's stock appears to offer a blend of stability and growth potential-a rare combination in today's market. For those with a multi-year horizon, the current valuation may represent an attractive entry point, provided the company maintains its operational discipline and innovation edge.