LPL Financial’s LPLA strategic buyouts keep it well positioned for future growth. Moreover, a solid liquidity position, along with its impressive capital-deployment activities, is as tailwind. However, mounting operating expenses and lower rates remain major near-term concerns.
LPL Financial has been recording decent advisory revenue growth. The same witnessed a seven-year (2014-2020) compound annual growth rate (CAGR) of 9.7%. Further, the company’s recruiting efforts, steady solid advisor productivity and strategic buyouts (Waddell & Reed’s wealth management business, Blaze Portfolio, E.K. Riley Investments, LLC and Lucia Securities) will likely stoke revenue growth. Also, the company’s launch of a no-transaction-fee exchange-traded fund network will boost the value of its advisory platform.
Apart from these, the company’s capital-deployment initiatives look encouraging. LPL Financial pays dividend on a quarterly basis. In addition, the company has a buyback plan in place, which had been suspended due to the pandemic. As of Mar 31, 2021, $350 million remained under the buyback authorization.
As of Mar 31, 2021, the company had net long-term and other borrowings of $2.3 billion, and cash and cash equivalents balance and due from banks, along with restricted cash balance $1.8 billion. However, LPL Financial’s times interest earned of 6.7 improved sequentially, at the end of first-quarter 2021. Thus, given the current liquidity position, it will be able to continue meeting debt obligations, even if the economic situation worsens.
Moreover, analysts seem optimistic regarding LPL Financial’ earnings prospects. The Zacks Consensus Estimate for earnings has moved 5.5% and 4.5% upward for 2021 and 2022, respectively, over the past 30 days.
Further shares of this Zacks Rank #3 (Hold) company have appreciated 62.2% over the past six months, outperforming the industry’s 47.9% rally.
Nonetheless, LPL Financial’s mounting expenses on account of increasing headcount, rising employee compensation and benefits expenses might deter bottom-line growth in the upcoming period. Total expenses witnessed a CAGR of 8.9% over the five-year period ended 2020. Costs are also likely to be elevated, given the company’s intention to upgrade technology to better serve clients.
Besides, uncertainty regarding the performance of the capital markets is a concern for LPL Financial’s commission revenues. While commission revenues increased in 2018 and marginally, in 2020, the same declined at a CAGR of 1.7% over the last seven years (2014-2020) due to the slowdown of capital markets.
Key Industry Picks
A few better performing stocks from the finance space are mentioned below:
Hancock Whitney Corporation HWC has witnessed an upward earnings estimate revision of 20.3% for 2021 over the past 60 days. This Zacks Rank #1(Strong Buy) stock has soared 76.5% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
First Internet Bancorp’s INBK current-year earnings estimate moved up 19.4% in 60 days’ time. Further, the company’s shares have rallied 33.6% over the past six months. At present, it flaunts a Zacks Rank #1.
Northfield Bancorp, Inc.’s NFBK ongoing-year earnings estimate moved 18.6% north in the past 60 days. In addition, the company’s shares have appreciated 52.2% in the past six months. Currently, it sports a Zacks Rank of 1.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report