optionsXpress Holdings, Inc. (OXPS)

OptionsXpress is one of the best run brokerage operations in the world and uses very high tech tools to help their 250,000+ customer’s trade, stocks, bonds, options, futures and mutual funds. You may think to yourself that all brokers are the same, so what makes OptionsXpress different? The difference is that their numbers are just amazing and their growth rates are extraordinaire. First let us begin by analyzing their margins. Their gross margins are about 76% and their net profit margins come in at around 40%. So just from those figures one can tell that it does not take much for this stock to turn a profit, so just imagine what it is doing with the extreme level of market volatility that we are experiencing these days.
Because one should never judge a company by one quarter or even by one year’s performance lets go back six years and see how the company performed on some key ratios;
Return on Equity
2002 = 150%
2003 = 222%
2004 = 152%
2005 = 63%
2006 = 48%
2007 = 43%

Return on Invested Capital

2002 = 189%
2003 = 300%
2004 = 152%
2005 = 64%
2006 = 49%
2007 = 47%

Though the company is not returning the insane results that it did 5-6 years ago, it is still knocking the ball out of the park as far as this analyst is concerned. And if you go back to when the company went public in 2005 it went public at $20. Well with all this growth on Main Street, the stock basically trades at about the same price that it went public at. With 40%+ profit margins, ROIC’s and ROE numbers I still can’t believe that the stock is down to such levels. Actually our FireRock Research thinks that the stock is worth $87 per share (Main Street Valuation = FireRock Element) so we think that it has some 300%+ to go before it becomes fully valued. Following our previous blog posts we will also do a Psaras Ratio analysis (PE/ROE) and see how OXPS comes in under our ratio. The PE for OXPS is 13.70 and the ROE is 42.42% giving us a ratio of 13.70/42.42 = .32. Remember a Psaras Ratio of 1.0 is good and below .65 is excellent. OptionsXpress is trading at half of our strong buy level for the Psaras Ratio, so we are sold.