LPL Financial Holdings (NASDAQ: LPLA) and Raymond James Financial (NYSE:RJF) are both mid-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, institutional ownership, dividends, profitabiliy, analyst recommendations, earnings and valuation.

Earnings & Valuation

This table compares LPL Financial Holdings and Raymond James Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
LPL Financial Holdings $4.13 billion 1.00 $560.84 million $2.30 19.96
Raymond James Financial $6.12 billion 1.95 $606.33 million $4.21 19.69

Raymond James Financial has higher revenue and earnings than LPL Financial Holdings. Raymond James Financial is trading at a lower price-to-earnings ratio than LPL Financial Holdings, indicating that it is currently the more affordable of the two stocks.

Dividends

LPL Financial Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 2.2%. Raymond James Financial pays an annual dividend of $0.88 per share and has a dividend yield of 1.1%. LPL Financial Holdings pays out 43.5% of its earnings in the form of a dividend. Raymond James Financial pays out 20.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. LPL Financial Holdings has raised its dividend for 4 consecutive years. LPL Financial Holdings is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares LPL Financial Holdings and Raymond James Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LPL Financial Holdings 5.10% 26.45% 4.70%
Raymond James Financial 9.78% 13.57% 2.21%

Institutional & Insider Ownership

91.2% of LPL Financial Holdings shares are held by institutional investors. Comparatively, 70.9% of Raymond James Financial shares are held by institutional investors. 4.0% of LPL Financial Holdings shares are held by company insiders. Comparatively, 11.2% of Raymond James Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings for LPL Financial Holdings and Raymond James Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LPL Financial Holdings 1 4 3 1 2.44
Raymond James Financial 0 3 3 0 2.50

LPL Financial Holdings presently has a consensus target price of $42.44, indicating a potential downside of 7.55%. Raymond James Financial has a consensus target price of $88.80, indicating a potential upside of 7.14%. Given Raymond James Financial’s stronger consensus rating and higher possible upside, analysts plainly believe Raymond James Financial is more favorable than LPL Financial Holdings.

Volatility & Risk

LPL Financial Holdings has a beta of 1.84, suggesting that its stock price is 84% more volatile than the S&P 500. Comparatively, Raymond James Financial has a beta of 1.65, suggesting that its stock price is 65% more volatile than the S&P 500.

Summary

Raymond James Financial beats LPL Financial Holdings on 9 of the 17 factors compared between the two stocks.

About LPL Financial Holdings

LPL Financial Holdings Inc. is a broker-dealer, a custodian for registered investment advisors and an independent consultant to retirement plans. The Company provides a platform of brokerage and investment advisory services to independent financial advisors, including financial advisors at financial institutions across the country. It also supported approximately 4,000 financial advisors, affiliated and licensed with insurance companies through customized clearing services, advisory platforms and technology solutions, as of December 31, 2016. Through its advisors, it is a distributor of financial products and services in the United States. It provides its technology and service to advisors through a technology platform that is server-based and Web-accessible. Its technology offerings are designed to permit its advisors to manage various aspects of their businesses. It automates time-consuming processes, such as account opening and management, document imaging and account rebalancing.

About Raymond James Financial

Raymond James Financial, Inc. (RJF) is a financial holding company. The Company’s subsidiaries include Raymond James & Associates, Inc. (RJ&A), Raymond James Financial Services, Inc. (RJFS), Raymond James Financial Services Advisors, Inc. (RJFSA), Raymond James Ltd. (RJ Ltd.), Eagle Asset Management, Inc. (Eagle), and Raymond James Bank, N.A. (RJ Bank). It operates through five segments: Private Client Group (PCG), Capital Markets, Asset Management, RJ Bank and the Other segment. The Private Client Group segment includes the retail branches of the Company’s broker-dealer subsidiaries located throughout the United States, Canada and the United Kingdom. The Capital Markets segment includes institutional sales and trading in the United States, Canada and Europe. The Asset Management segment includes the operations of Eagle, the Eagle Family of Funds and other fee-based asset management programs. RJ Bank segment provides corporate loan, securities based loans (SB) and residential loans.

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