LPL Financial Holdings (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 marginally upward for 2019 and 2020, respectively, over the past 60 days. The stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance also looks impressive. Its shares surged 51% in 2019, outperforming the industry’s rally of 19.4%.
Here's Why LPL Financial Stock is Worth Betting on
Earnings strength: LPL Financial witnessed 28.9% growth in earnings over the past three to five years, significantly above the industry average of 12.2%. This momentum is expected to continue in the near term as evident from its projected earnings growth rate of 34.2% and 1% 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.
Also, the company has an impressive earnings surprise history. It has surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 10.6%.
It has a Growth Score of A. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Revenue growth: LPL Financial’s revenues witnessed a CAGR of 4.6% over the last six years (2013-2018). Additionally, the acquisition of Lakeland, FL-based Allen & Company will support the top line. The same is expected to increase 6.5% for 2020.
Superior Return on Equity (ROE): LPL Financial has ROE of 59.56%, higher than the industry average of 12.26%. 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 1.36 and 0.86, below the industry averages of 1.52 for both.
Further, the stock has a Value Score of A. 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.
Other Key Picks
E*TRADE Financial Corporation (ETFC - Free Report) currently carries a Zacks Rank #2. The company’s 2020 earnings estimates have moved 2.8% upward over the past 60 days. Its shares have rallied 27.3% in the past three months.
The Zacks Consensus Estimate for 2020 earnings for Tradeweb Markets Inc. (TW - Free Report) has increased nearly 1% over the past 60 days. Its shares have rallied 18.4% over the past three months. The stock currently has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Invesco Ltd. (IVZ - Free Report) earnings estimates for 2020 have moved 2% north over the past 60 days. Its shares have jumped 14% over the past three months. The stock presently has a Zacks Rank #2.
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