LPL Financial Holdings Inc. (LPLA - Free Report) looks like an attractive investment option right now, given its strong fundamentals and promising prospects. Further, steady improvement in trade volumes will support its revenue growth.
Analysts are also bullish on the stock. The Zacks Consensus Estimate for earnings has moved 4.7% and 4.5% upward for 2019 and 2020, respectively, over the past 60 days. Thus, the stock currently sports a Zacks Rank #1 (Strong Buy).
The company’s price performance also looks impressive. Its shares have rallied 35.3% so far this year, outperforming the industry’s rise of 8.7%.
Factors That Make LPL Financial Stock an Attractive Pick
Earnings strength: LPL Financial witnessed 18.8% growth in earnings over the past three to five years. This momentum is expected to continue in the near term as evident from its projected earnings growth rate of 32.8% and 5.8% for 2019, and 2020, respectively.
Further, the company’s long-term (three to five years) expected earnings growth rate of 15% promises rewards for shareholders.
Revenue growth: LPL Financial’s revenues witnessed a CAGR of 4.6% over the last six years (2013-2018). Additionally, the company’s deal to acquire Lakeland, FL-based Allen & Company will support revenues. The top line is expected to increase 8.2% for 2019 and 6.8% for 2020, ensuring steady improvement.
Superior Return on Equity (ROE): LPL Financial has ROE of 53.97%, higher than the industry average of 12.21%. This shows that the company reinvests cash more efficiently than its peers.
Stock looks undervalued: If we compare LPL Financial’s price-to-sales (P/S) and PEG ratios with the respective industry averages, the stock appears undervalued. Its P/S and PEG ratios are 1.30 and 0.78, below the respective industry averages of 1.47 and 1.23.
Further, the stock has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.
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