TD Bank: It’s Been a Great Run, but I’ll Soon Part Ways

The Toronto-Dominion Bank (TSX:TD) has been arguably my biggest stock market win in recent years. Investing about 10% of my money into the stock in December of 2024, when it was trading in the mid-seventies, I am currently up 140% on the shares (including dividends). While I did achieve a higher return on some Alphabet shares purchased at the 2025 lows, I did not invest nearly as much money in those shares. So on a dollar basis (rather than a percentage basis), TD has been my biggest win in the last year and a half.

As it turns out, my TD Bank shares have a bit of a history behind them! The 10% of my portfolio that I invested in TD was a little more than 60% of the proceeds I got from selling a block of Bank of America (NYSE:BAC) stock I’d been holding since the Spring 2023 banking crisis. Bank of America was really killing it in December of 2024 when TD was ailing and at decade-lows, and I thought that BAC had run about as far as it was going to. So I sold all my BAC and invested 60% of the proceeds into TD – I forget where I invested the rest of the BAC proceeds.

I ended up being wrong on Bank of America: BAC is at $59 now. However, TD has done far better than BAC since I sold the latter, so my series of trades has been a success. BAC at $59 is only up 28% from my sale price, while my TD shares are up 140% (again, including dividends). So, even though I put only 60% or so of my BAC winnings into TD, I still grew the sum into more than I’d have made staying put in BAC!

TD’s rise since the December 2024 lows has been nothing short of meteoric. Up 140% on a dividends-reinvested basis, it has truly crushed it. But alas all good things must come to an end, and I think TD is fully valued today. I have sold a small portion of my stock, will sell another portion if it hits $175, and may sell all of it if I find a better alternative investment (I’ll disclose one I’m thinking about momentarily).

Why I think TD is fully valued now

TD Bank stock currently trades at multiples it hasn’t seen in a long time. True, the company is growing – earnings were up 20% last quarter – but with banks being so sensitive to economic conditions, we can’t expect this to last forever. The good times will likely stop rolling eventually. In the meantime, TD currently trades at:

• 18 times trailing earnings.
• 17.7 times forward earnings (the next year’s earnings based on analyst estimates).
• 4.9 times sales.
• 2.3 times book.

These are among the highest multiples TD has traded at in the last decade.

Now you might think “yes, but compared to money-losing AI stocks trading at 100 times sales, TD’s a steal!” Not so fast. There’s a reason why banks usually trade at low-ish multiples. They are among the most leveraged businesses in the world, which creates risk, and they are cyclicals, tending to make less money when the economy is weak (some tech stocks are non-cyclical). So I think TD is getting pricey at 18 times earnings.

Where I’m looking to deploy capital now

Having established that I’ll probably be progressively selling off my TD shares in the months to come, I’ll share where I’m thinking about investing the money:

HSBC. It is a British bank expanding rapidly across Asia, with deep roots in Hong Kong. Trading at 12 times earnings, it’s cheaper than TD, and I think it has more growth potential. Don’t take this as a recommendation: my research on HSBC is far from done, and I have not bought a single share yet. But it’s an investment I’m strongly considering today.

The post TD Bank: It’s Been a Great Run, but I’ll Soon Part Ways appeared first on The Motley Fool Canada.

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More reading

• 5 Canadian Stocks Beginners Can Buy and Hold Forever
• 2 Canadian Dividend Giants to Buy With Rates on Hold
• A 3-Stock TFSA Game Plan for the Rest of 2026
• 1 TSX Stock I’d Buy After a Bad Headline Sent Shares Lower
• Canadians: Here’s How Much You Need in Your TFSA to Retire

Fool contributor Andrew Button owns shares in TD Bank. Bank of America is an advertising partner of Motley Fool Money. HSBC Holdings is an advertising partner of Motley Fool Money. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy.