The investment management industry performed well during the first quarter of 2018, supported by an improvement in the interest-rate scenario as well as higher trading activities, given the increase in volatility. Moreover, benefits from a stabilizing economy position the industry well for growth.
Thus, it seems a wise idea to add a few stocks from this industry to your portfolio now. Based on its strong fundamentals and growth prospects, LPL Financial Holdings Inc. (LPLA - Free Report) appears to be a solid pick now.
The company’s Zacks Consensus Estimate for current-year earnings has been revised 26.7% upward over the last 30 days, reflecting analysts’ optimism regarding its earnings growth potential. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).
Also, its price performance looks impressive. Its shares have rallied 22% so far this year, outperforming the industry’s growth of 7%. Moreover, LPL Financial has a Momentum Score of A. Our research shows that stocks with a Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
LPL Financial has a number of other aspects that make it an attractive investment option.
Earnings per Share (EPS) Strength: LPL Financial has witnessed 3.4% growth in earnings per share over the last three to five years. This momentum is expected to continue in the near term as evident from its projected EPS growth rate of 63% and 15.8% for 2018 and 2019, respectively.
Further, its long-term (three to five years) expected EPS growth rate of 15% promises rewards for shareholders.
Revenue Growth: LPL Financial’s revenues have witnessed a CAGR of 3.2% over the last six years (2012-2017). Further, the top line is expected to increase 19.5% in 2018, higher than the industry average of 5.4%.
Superior Return on Equity (ROE): LPL Financial has an ROE of 31.76%, which is far better than the industry average of 9.80%. This shows that the company reinvests its cash more efficiently than its peers.
Stock Looks Undervalued: If we compare the company’s price-to-earnings (P/E) and price-to-sales (P/S) ratios with the respective industry averages, the stock appears undervalued. Its P/E (F1) and P/S ratios are 14.3 and 1.4, below the respective industry averages of 15.7 and 1.5.
Other Stocks to Consider
A few other stocks in the same space worth considering are E*TRADE Financial Corporation (ETFC - Free Report) , Interactive Brokers Group, Inc. (IBKR - Free Report) and Goldman Sachs (GS - Free Report) . Each of these stocks sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
E*TRADE Financial’s Zacks Consensus Estimate for the current-year earnings moved 11.3% upward over the past 60 days. The company’s shares have surged 92.8% over the past 12 months.
Interactive Brokers’ current-year earnings estimates have been revised 5.2% upward over the past 60 days. Its shares have gained significantly in the past year.
Over the past 60 days, Goldman Sachs’ current-year earnings estimates have been revised 7.5% upward. Over the past 12 months, the company’s shares have rallied 12%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>