Over the last six months, LPL Financial’s shares have sunk to $303.41, producing a disappointing 14.7% loss - a stark contrast to the S&P 500’s 12.4% gain. This may have investors wondering how to approach the situation.
Following the drawdown, is now a good time to buy LPLA? Find out in our full research report, it’s free.
Why Are We Positive on LPL Financial?
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
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Luckily, LPL Financial’s revenue grew at an exceptional 24.5% compounded annual growth rate over the last five years. Its growth beat 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 EPS grew at 27.2% compounded annual growth rate over the last five years, higher than its 24.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, quantifies financial firm profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, LPL Financial has averaged an ROE of 37.3%, 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 ranks near the top of our list. With the recent decline, the stock trades at 12× forward P/E (or $303.41 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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