Why Toronto-Dominion Bank (TSX:TD) Stock Could Be Headed for $80

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) got a boost from its Q4 earnings, and more could be on the way.

| More on:

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) hasn’t had a very strong year so far, but it could end 2018 on a high note. It has been trading a bit low lately, but a strong Q4 performance could give the share price some much-needed momentum.

Last week, TD released its quarterly results, which continued to show impressive growth year over year. Revenue for the year was up over 9% and profits grew by a similar amount.

The bank came in ahead of what analysts were expecting for the quarter as it saw sales rise in its Canadian retail segment by 8.4%, while south of the border the increase in revenue was 12.5%.

Positive reaction from investors, but could be much more to come

The stock jumped on results to over $73, but given that it was at $80 just a few months ago, this could be just the start of a much bigger rally.

TD’s stock has normally traded at around 13 times its earnings and it hasn’t been at that level lately; it’s been a lot closer to 12. While that might seem trivial, when you factor in higher earnings per share (EPS), it could leave a lot of upside for the stock.

Over the last 12 months, TD’s EPS came in at $6.01. Multiplied by a price-to-earnings ratio of 13, that puts the stock at a value of over $78. However, that’s at a very tight multiple of 13, and it’s likely it could come in higher than that, which is why $80 could be in sight.

Markets have been weighing down quality stocks

Bank stocks and the markets as a whole have struggled over the recent weeks and there’s been a lot more selling than warranted, leaving stocks like TD’s trading at discounts to where they’ve normally been valued at.

Prior to the results, TD’s stock was down more than 10% from its peak and was barely above $70 per share. That’s pretty unusual for a stock that has normally provided investors with a lot more stability.

Nonetheless, it has created an opportunity for investors that are looking for a great price to own one of the top stocks on the TSX.

Why the stock could have more success to come

If the stock reaches $80, that could just be the start. as future quarters will likely continue to build on this strong performance and could result in even higher prices and perhaps justify stronger multiples.

The U.S. market is continuing to drive a lot of growth for TD and with the economy showing no signs of slowing down, it’s likely we’ll see that segment continue to produce strong results. Similarly, Canada has had multiple interest rate increases in response to a strong economy as well.

Why TD is a good buy today

While sooner or later it’s inevitable we’ll see a slowdown happen, for the time being, economic conditions remain strong, which is one good reason to invest in TD. Another reason, however, is that the stock is a proven winner and the best bank stock you can invest in on the TSX. It also pays a great dividend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Dividend Stocks

investment research
Dividend Stocks

Best Stock to Buy Right Now: TD Bank vs Manulife Financial?

TD and Manulife can both be interesting stock picks for today, depending on your investment style.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These stocks are out of favour but could deliver nice returns over the coming years.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »