LPL Financial Holdings (NASDAQ: LPLA) and The Charles Schwab Corporation (NYSE:SCHW) are both mid-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, valuation, dividends and analyst recommendations.

Insider and Institutional Ownership

90.8% of LPL Financial Holdings shares are held by institutional investors. Comparatively, 79.5% of The Charles Schwab Corporation shares are held by institutional investors. 4.0% of LPL Financial Holdings shares are held by company insiders. Comparatively, 12.0% of The Charles Schwab Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares LPL Financial Holdings and The Charles Schwab Corporation’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%
The Charles Schwab Corporation 26.73% 15.41% 0.98%

Dividends

LPL Financial Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 2.2%. The Charles Schwab Corporation pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. LPL Financial Holdings pays out 43.5% of its earnings in the form of a dividend. The Charles Schwab Corporation pays out 21.5% 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.

Analyst Ratings

This is a breakdown of recent ratings and price targets for LPL Financial Holdings and The Charles Schwab Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LPL Financial Holdings 1 3 4 1 2.56
The Charles Schwab Corporation 0 6 10 0 2.63

LPL Financial Holdings currently has a consensus target price of $46.89, indicating a potential upside of 2.33%. The Charles Schwab Corporation has a consensus target price of $44.27, indicating a potential upside of 12.72%. Given The Charles Schwab Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe The Charles Schwab Corporation is more favorable than LPL Financial Holdings.

Volatility and Risk

LPL Financial Holdings has a beta of 1.84, meaning that its stock price is 84% more volatile than the S&P 500. Comparatively, The Charles Schwab Corporation has a beta of 1.63, meaning that its stock price is 63% more volatile than the S&P 500.

Valuation and Earnings

This table compares LPL Financial Holdings and The Charles Schwab Corporation’s top-line revenue, earnings per share (EPS) 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 19.92
The Charles Schwab Corporation $8.08 billion 6.51 $2.00 billion $1.49 26.36

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

Summary

The Charles Schwab Corporation beats LPL Financial Holdings on 10 of the 17 factors compared between the two stocks.

LPL Financial Holdings Company Profile

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.

The Charles Schwab Corporation Company Profile

The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, ETFs, advice solutions, banking and trust. Brokerage provides a range of brokerage accounts with cash management capabilities. Mutual funds offer third-party mutual funds through the Mutual Fund Marketplace.

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