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LPL Financial (LPLA)
NASDAQ:LPLA
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LPL Financial
(NASDAQ:LPLA)77Outperform
Positive Factors
Earnings
Analyst raises LPL Financial Holdings' earnings per share estimates due to better revenues.
Growth and Market Share
LPL is gaining market share with record recruited assets of $149 billion, up 28% year over year.
Negative Factors
Client Cash Trends
Client cash fell 5.3% month-over-month, which is below the consensus estimate for the quarter.
LPL Financial (LPLA) vs. S&P 500 (SPY)
Market Cap
$25.16B
Dividend Yield0.36%
Average Volume (3M)860.96K
Price to Earnings (P/E)24.0
Beta (1Y)0.85
Revenue Growth23.20%
EPS Growth2.38%
CountryUS
Employees9,000
SectorFinancial
Sector Strength93
IndustryCapital Markets
Share Statistics
EPS (TTM)14.03
Shares Outstanding74,679,756
10 Day Avg. Volume1,063,900
30 Day Avg. Volume860,961
Financial Highlights & Ratios
PEG Ratio10.09
Price to Book (P/B)N/A
Price to Sales (P/S)2.57
Price to Cash Flow (P/CF)-35.10
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$410.00Price Target Upside22.79% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
LPL Financial Business Overview & Revenue Model
Company DescriptionLPL Financial Holdings Inc. (NASDAQ: LPLA) is a leading provider of investment and financial advisory services in the United States. The company operates as an independent broker-dealer, providing a platform for over 20,000 financial advisors nationwide. LPL Financial offers a range of services, including investment advisory, brokerage, and custody services, catering to independent financial advisors, financial institutions, and their clients. The company's mission is to empower advisors with the tools and resources they need to provide personalized financial guidance to their clients.
How the Company Makes MoneyLPL Financial generates revenue primarily through fees and commissions associated with the advisory and brokerage services it provides. The company earns asset-based fees from advisory services and margin interest, which are charged based on the assets managed or held in client accounts. Additionally, LPL Financial receives commission revenue from transactions executed on behalf of clients. The company also benefits from partner relationships, including revenue-sharing agreements with mutual fund firms, insurance companies, and other financial product providers. These partnerships contribute to LPL's earnings by providing access to a wide range of financial products that advisors offer to their clients. Furthermore, LPL Financial generates income from interest on client cash balances and other ancillary services.
LPL Financial Financial Statement Overview
Summary
LPL Financial demonstrates strong revenue growth and profitability, supported by a robust balance sheet with no debt and increasing equity. However, cash flow metrics suggest potential liquidity challenges due to increased capital expenditures. While the company is on a solid growth trajectory, attention to cash flow management will be crucial to sustaining long-term financial health.Income Statement
LPL Financial has shown impressive revenue growth over the years, with a significant increase from $2.35 billion in 2021 to $12.39 billion in 2024. Gross profit margin stands strong at 90.0% for 2024, indicating efficient cost management. However, the net profit margin slightly decreased from 10.6% in 2023 to 8.5% in 2024, suggesting increased expenses or cost pressures impacting net profitability. Overall, the income statement reveals robust growth and solid profitability metrics.85
Very Positive
Balance Sheet
The balance sheet shows a healthy improvement in equity, with stockholders' equity rising from $2.08 billion in 2023 to $2.93 billion in 2024. The debt-to-equity ratio improved significantly as total debt was eliminated by 2024. ROE is strong at 36.1% for 2024, reflecting effective utilization of equity in generating profits. The equity ratio at 22.0% indicates a moderate reliance on equity financing. Overall, the balance sheet is stable with a strong equity position and reduced debt levels.78
Positive
Cash Flow
Cash flow analysis reveals a concerning decline in free cash flow from $109.3 million in 2023 to -$284.9 million in 2024, primarily due to a significant increase in capital expenditures. The operating cash flow to net income ratio decreased as well, indicating less cash generation relative to earnings. Despite these challenges, the company has effectively managed operating cash flows historically. Overall, the cash flow situation shows potential strain due to high capital investments.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 12.39B | 10.05B | 3.06B | 2.35B | 2.00B | Gross Profit |
| 11.15B | 3.05B | 1.95B | 1.35B | 1.10B | EBIT |
| 1.67B | 1.63B | 1.24B | 601.33M | 626.07M | EBITDA |
| 1.98B | 1.99B | 1.53B | 832.02M | 908.93M | Net Income Common Stockholders |
| 1.06B | 1.07B | 845.70M | 459.87M | 472.64M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.01B | 541.76M | 847.52M | 495.25M | 808.61M | Total Assets |
| 13.32B | 10.39B | 9.48B | 7.99B | 6.52B | Total Debt |
| 5.75B | 3.96B | 2.72B | 2.81B | 2.59B | Net Debt |
| 4.78B | 3.50B | 1.87B | 2.32B | 1.78B | Total Liabilities |
| 10.39B | 8.31B | 7.31B | 6.32B | 5.21B | Stockholders Equity |
| 2.93B | 2.08B | 2.17B | 1.67B | 1.31B |
| Cash Flow | Free Cash Flow | |||
| -284.94M | 109.33M | 1.64B | 237.15M | 634.41M | Operating Cash Flow |
| 277.59M | 512.61M | 1.95B | 453.13M | 789.94M | Investing Cash Flow |
| -1.59B | -860.19M | -376.40M | -458.64M | -187.50M | Financing Cash Flow |
| 1.42B | -208.53M | -504.27M | 278.84M | -275.19M |
LPL Financial Technical Analysis
Negative
333.90
Price Trends
352.67
Negative
326.61
Positive
283.85
Positive
Market Momentum
-4.02
Positive
36.80
Neutral
22.02
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LPLA, the sentiment is Negative. The current price of 333.9 is below the 20-day moving average (MA) of 363.23, below the 50-day MA of 352.67, and above the 200-day MA of 283.85, indicating a neutral trend. The MACD of -4.02 indicates Positive momentum. The RSI at 36.80 is Neutral, neither overbought nor oversold. The STOCH value of 22.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LPLA.
LPL Financial Risk Analysis
LPL Financial disclosed 32 risk factors in its most recent earnings report. LPL Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
LPL Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $50.44B | 15.22 | 68.31% | 1.19% | 11.38% | 39.25% | |
79 Outperform | $29.47B | 14.05 | 19.07% | 1.29% | 13.79% | 28.57% | |
77 Outperform | $25.16B | 24.01 | 42.26% | 0.36% | 23.20% | 2.38% | |
77 Outperform | $192.40B | 15.01 | 13.16% | 3.04% | 9.17% | 53.77% | |
73 Outperform | $139.14B | 24.99 | 13.30% | 1.37% | 1.87% | 17.63% | |
68 Neutral | $10.54B | 30.76 | 2.76% | 6.15% | 9.48% | -65.57% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
LPLA
LPL Financial
333.90
70.74
26.88%
AMP
Ameriprise Financial
499.34
92.93
22.87%
BEN
Franklin Resources
20.32
-6.53
-24.32%
MS
Morgan Stanley
119.29
35.14
41.76%
RJF
Raymond James Financial
143.37
26.21
22.37%
SCHW
Charles Schwab
74.63
8.61
13.04%
LPL Financial Earnings Call Summary
Earnings Call Date: Jan 30, 2025 | % Change Since: -7.71% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong performance by LPL Financial with record organic asset growth, strategic acquisitions, and impressive financial results. However, there are challenges related to seasonal headwinds and ongoing expense growth. The positive highlights, especially the strong asset growth and financial performance, outweigh the lowlights, indicating a positive outlook overall.Highlights
Record Organic Asset Growth
LPL Financial delivered industry-leading organic asset growth of 10% in 2024, aided by the onboarding of Prudential Advisors and setting recruiting records in both independent advisor and institutional channels.
Q4 Record Organic Net New Assets
In Q4, LPL Financial attracted record organic net new assets of $68 billion, representing a 17% annualized growth rate, leading to total assets reaching a new high of $1.7 trillion.
Acquisition and Integration Milestones
LPL Financial closed the acquisition of Atria Wealth Solutions and onboarded Prudential Advisors, with the transaction progressing well, on track to meet a 80% retention target.
Strong Financial Performance
LPL Financial achieved record adjusted earnings per share of $16.51 for the year and $4.25 for Q4. Gross profit increased by $100 million sequentially to $1,228 million.
Lowlights
Seasonal Headwinds in Recruiting
The company noted natural seasonal headwinds to advisory movement in December, which typically carries into January, impacting recruiting momentum.
Challenges with Core G&A Growth
Core G&A expenses grew by approximately 8% in 2024, with expectations to grow in the range of 6% to 8% in 2025, indicating ongoing cost pressures despite efforts to drive operating leverage.
Impact of Interest Expense
Interest expense increased to $82 million in Q4, driven by higher revolver balances following the Atria transaction, though the company expects $5 million of annual interest expense savings from refinancing.
Company Guidance
In LPL Financial Holdings Inc.'s fourth-quarter 2024 earnings call, the company highlighted significant growth and strategic initiatives. Key metrics included a record adjusted earnings per share (EPS) of $16.51 for the year and $4.25 for the quarter. The firm achieved industry-leading organic asset growth of 10%, with total assets reaching $1.7 trillion and organic net new assets of $68 billion, representing a 17% annualized growth rate. Recruitment efforts were strong, with $79 billion in recruited assets for the quarter and $149 billion for the year. The integration of Prudential Advisors added $63 billion to the recruited assets in Q4. Looking ahead, LPL Financial plans to maintain client centricity, empower employees, and improve operating leverage, with expectations for continued recruiting momentum and strategic focus on expanding capabilities and services across wealth management.LPL Financial Corporate Events
Executive/Board ChangesLegal Proceedings
LPL Financial Settles with Former CEO Dan Arnold
Negative
Dec 9, 2024
LPL Financial Holdings Inc. has reached a settlement with former CEO Dan H. Arnold, allowing him to retain 47,994 stock options valued at $12 million, following his termination for cause. This settlement includes non-competition and non-solicitation clauses, effective until September 30, 2025, and represents 15% of the potential severance benefits he could have received if terminated without cause.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.