LPL Financial Holdings Inc. (LPLA) Stock Analysis and Metrics

Sector: Financial Services Industry: Capital Markets CIK: 0001397911

Market Cap 27.60 Bn

P/B 5.47

P/E 33.13

P/S 1.77

ROIC (Qtr) 10.27

Div Yield % 0.41

Rev 1y % (Qtr) 46.44

Total Debt (Qtr) 7.52 Bn

Debt/Equity (Qtr) 1.49

About

LPL Financial Holdings Inc., also known as LPLA, is a significant player in the financial services industry, specializing in providing technology solutions and support to independent financial advisors and enterprises. The company operates in various segments, including integrated technology solutions, comprehensive clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, and in-house research. LPL Financial Holdings Inc. offers a wide range of products and...

LPL Financial Holdings Inc., also known as LPLA, is a significant player in the financial services industry, specializing in providing technology solutions and support to independent financial advisors and enterprises. The company operates in various segments, including integrated technology solutions, comprehensive clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, and in-house research.

LPL Financial Holdings Inc. offers a wide range of products and services to its clients, including an integrated technology platform that provides advisors with the tools they need to effectively manage all critical aspects of their businesses. The technology platform includes features such as account opening and management, document imaging, transaction execution, and account rebalancing. Additionally, the company offers comprehensive clearing services that provide custody and clearing services for the majority of advisors' transactions, enabling them to focus on their clients' needs.

The company's compliance services are designed to provide advisors with a strong framework through which to understand and operate within regulatory guidelines. LPL Financial Holdings Inc. also offers consultative practice management programs and training services to help advisors enhance and grow their businesses. These services include the use of technology and best practices.

LPL Financial Holdings Inc. provides business services and planning and advice services that offer advisors a range of solutions to support their clients' financial planning and wealth management needs. The company's in-house research team provides advisors with comprehensive research on a broad range of investments. This includes market analysis and commentary, manager research, capital markets assumptions, strategic and tactical asset allocation advice, and individual equity guidance.

LPL Financial Holdings Inc. is the market leader in the enterprise channel, providing support to over 3,600 financial advisors at approximately 1,100 enterprises nationwide. The company's scale and independence allow it to offer a compelling value proposition to independent financial advisors and enterprises. This includes a comprehensive technology platform, comprehensive clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, and in-house research.

LPL Financial Holdings Inc.'s competitive strengths include its market leadership position and scale, comprehensive solutions, flexibility of its business model, and ability to attract and retain advisors. The company's advisors are a community of diverse financial services professionals who support approximately 8.3 million client accounts.

The company's customers include a diverse range of financial advisors and enterprises, including wirehouses, regional broker-dealers, banks, and other registered investment advisor (RIA) firms. LPL Financial Holdings Inc.'s advisors are licensed with the company as investment advisory representatives or registered representatives and are required to meet certain standards and requirements to maintain their licenses.

The brand names and/or trade names of its products and services that could be found in the document include Access Overlay, BlazePortfolio, BranchNet, CLIENTWORKS, Fortigent, LPL, LPL Career Match, LPL Financial (& Design), Manager Access Network, Manager Access Select, OMP, SPONSORWORKS, ADVISORYWORLD, CLIENTWORKS CONNECTED, ALLEN & COMPANY OF FLORIDA, LLC, and THE PRIVATE TRUST COMPANY, N.A. (& Design). These brand names and trade names demonstrate the company's commitment to providing a comprehensive and integrated technology platform for its clients.

Price action

Investment thesis

Bull case

Free cash flow of (1.94B) provides excellent 20.89x coverage of dividends (92.85M), indicating sustainable shareholder returns.
Retained earnings of 5.57B represent substantial 1.10x of equity 5.04B, indicating strong internal capital generation.
Strong tangible asset base of 12.05B provides 2.02x coverage of intangibles 5.98B, indicating robust asset quality.
Tangible assets of 12.05B provide robust 6.24x coverage of receivables 1.93B, showing strong asset quality.

Bear case

Operating cash flow of (1.38B) barely covers its investment activities of (3.17B), with a coverage ratio of 0.43, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Cash reserves of 2.82B provide limited coverage of acquisition spending of (2.58B), which is -1.10x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
The company's operating cash flow of (1.38B) shows concerning coverage of stock compensation expenses of 93.59M, with a -14.69 ratio indicating potential earnings quality issues.
Free cash flow of (1.94B) provides weak coverage of capital expenditures of 564.22M, with a -3.44 ratio suggesting additional external financing needs for growth initiatives.
Operating cash flow of (1.38B) provides minimal -5.29x coverage of tax expenses of 260.17M, suggesting potential tax planning inefficiencies or unsustainable tax positions.

Peer comparison

Companies in the Capital Markets

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	GS	Goldman Sachs Group Inc	284.23 Bn	17.94	4.84	911.32 Bn
2	MS	Morgan Stanley	279.63 Bn	17.97	4.05	353.12 Bn
3	SCHW	Schwab Charles Corp	179.33 Bn	23.09	7.83	27.59 Bn
4	HOOD	Robinhood Markets, Inc.	106.92 Bn	48.73	25.43	0.00 Bn
5	CRCL	Circle Internet Group, Inc.	40.97 Bn	261.00	24.22	0.15 Bn
6	IBKR	Interactive Brokers Group, Inc.	28.23 Bn	30.79	4.75	28.43 Bn
7	LPLA	LPL Financial Holdings Inc.	27.60 Bn	33.13	1.77	7.52 Bn
8	FUTU	Futu Holdings Ltd	22.89 Bn	18.13	8.54	1.75 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	1.60	1.07
EV to Cash from Ops. EV/CFO	-20.99	15.33
EV to Debt EV to Debt	3.84	21.89
EV to EBIT EV/EBIT	19.59	-0.80
EV to EBITDA EV/EBITDA	14.08	11.20
EV to Free Cash Flow [EV/FCF] EV/FCF	-14.88	43.08
EV to Market Cap EV to Market Cap	1.05	-0.05
EV to Revenue EV/Rev	1.85	12.82
Price to Book Value [P/B] P/B	5.47	3.09
Price to Earnings [P/E] P/E	33.13	6.20

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	8.97	4.22
Dividend Payout Ratio % Div Payout % (Qtr)	11.00	10.37
Dividend per Basic Share Div per Share (Qtr)	1.20	0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	-4.95	-8.68
Interest Coverage Int. cover (Qtr)	3.88	37.53

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-12.20	-12,429.64
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	-4.79	1,588.78
Dividend Growth (1y) % Div 1y % (Qtr)	0.00	4.88
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	-5.65	270.93
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	2.63	333.57
EBIT Growth (1y) % EBIT 1y % (Qtr)	-7.48	3,103.22
EBT Growth (1y) % EBT 1y % (Qtr)	-18.74	3,039.53
EPS Growth (1y) % EPS 1y % (Qtr)	-18.66	24.25
FCF Growth (1y) % FCF 1y % (Qtr)	-2,119.04	-80.08
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	23.36	51.33

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.86	0.42
Cash Payout Ratio Cash Payout (Qtr)	-0.11	-0.08
Cash Ratio Cash Ratio	0.00	2.01
Current Ratio Current Ratio	0.00	3.47
Debt to Equity Ratio Debt/Equity (Qtr)	1.49	1.46
Interest Cover Ratio Int Coverage (Qtr)	3.88	37.53
Times Interest Earned Times Interest Earned (Qtr)	3.88	37.53

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	13.20	76.68
EBIT Margin % EBIT Margin % (Qtr)	9.46	46.81
EBT Margin % EBT Margin % (Qtr)	7.02	58.57
Gross Margin % Gross Margin % (Qtr)	34.00	53.60
Net Profit Margin % Net Margin % (Qtr)	5.40	29.41

LPL Financial Holdings Inc. (NASDAQ: LPLA)

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