TD Bank’s U.S. retail operations have historically been its primary growth driver. The segment experienced high double-digit growth in the 2000s and 2010s. While most U.S. banks lost decades in the aftermath of the 2008 financial crisis, TD was able to ride through systemic risk and outperform the market in the first quarter of the 21st century.
When TD Bank’s assets were capped by the US Department of Justice (DoJ) in 2024, investors understandably became nervous. In fact, they got so nervous that they sold TD stock in huge quantities, driving it all the way down to $74. It reached that low point in December 2024, just before the start of a new year. That fact was a big part of why TD outperformed the market by such a wide margin in 2025.
That brings us to today. We’re entering a new year and the market is much more expensive than it was at the beginning of 2025. Big tech companies are spending huge amounts of money on AI infrastructure, with uncertain returns. This risky situation has led to volatile trading in the world’s largest stocks. In such a market it is tempting to camp with a stable, predictable bank like TD. But is this really the best move? In the following sections, I will explore whether TD Bank can outperform the market in 2026, just as it will in 2025.
Growth potential
One thing TD won’t have in 2026 is a ton of growth potential. The bank’s U.S. retail assets are capped, meaning no growth is possible in that segment. The Canadian retail business faces potential compression in net interest income (NII) margin due to falling interest rates. The company’s investment banking segment is growing, but as a percentage of the whole it is too small to make any difference for the time being.
Valuation
At its current price, TD stock is valued at about ‘the same level’ as its sector. At the time of writing this article, it was trading at 15.5 times adjusted earnings, 11 times reported earnings, a price-to-sales ratio of 3.5 and a price-to-book ratio of 1.76. These multiples are about average for major Canadian banks, but below average for the TSX. I’d call TD stock a solid ‘B’, assuming multiple valuation.
Value relative to opportunity
One area where TD continues to shine in 2026 is its value compared to other stocks in the opportunities presented. US big tech companies are trading at high prices while seeing their free cash flow (FCF) decline due to AI spending. Canadian utilities and telecom companies trade at higher prices than TSX banks on average, while underperforming in terms of growth and profitability. Energy stocks are volatile. Compared to these odds, TD stock looks relatively attractive.
The bottom line
Overall, I think TD still has a chance to outperform the market in 2026. However, if this year’s outperformance materializes, it will likely have more to do with TD holding in a bear market than TD spiraling out of control. It’s a pretty risky and expensive market overall.
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