Monday, December 14, 2009
The following is a brief write up for Toronto-Dominion Bank (NYSE: TD). As usual, I have translated the piece into Scribd to preserve the formatting of the charts. If you would like a Word copy feel free to email me and I will send you one.
While the company's foray into the US market through the purchases of BankNorth and Commerce Bancorp has not gone quite as planned, overall TD is a solid bank with a conservative approach. The stock is currently trading at a discount to Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal on a price to book basis. Even given the emerging troubles in the US portion of the loan portfolio, the discount that TD trades at compared to its competitors does not seem justified. Specifically, over the last 12 months TD has had the highest net interest margin, a figure that is a good barometer of the strength of a banking franchise. Additionally, TD has set aside the largest percentage of total loans for credit losses even though its nonperforming loan to total loan ratio has been the lowest of the group. All in all the shares look a little pricey at the current level but investors should look to accumulate shares in the $50-$55 range based on my estimate of intrinsic value around $66 a share. Buying in this price range would allow for a 20-25% margin of safety to protect against any overestimate or impairment of intrinsic value.
(Picture courtesy of Canada.com)
Quick Idea for Toronto-Dominion Bank (TD)