Although the S&P 500 is down 4.8% over the past six months, LPL Financial’s stock price has fallen further to $296.79, losing shareholders 10.8% of their capital. This might have investors contemplating their next move.
Following the pullback, is now a good time to buy LPLA? Find out in our full research report, it’s free.
Why Is LPLA a Good Business?
As the nation's largest independent broker-dealer with no proprietary products of its own, LPL Financial (NASDAQ: LPLA) provides technology, compliance, and business support services to independent financial advisors and institutions who manage investments for retail clients.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Over the last five years, LPL Financial grew its revenue at an exceptional 23.7% compounded annual growth rate. Its growth surpassed the average financials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
LPL Financial’s astounding 25.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, LPL Financial has averaged an ROE of 37.9%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows LPL Financial has a strong competitive moat.
Final Judgment
These are just a few reasons why LPL Financial is a cream-of-the-crop financials company. With the recent decline, the stock trades at 12.4× forward P/E (or $296.79 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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