Head to Head Comparison: T. Rowe Price (TROW) & LPL Financial (LPLA)

T. Rowe Price (NASDAQ: TROW) and LPL Financial (NASDAQ:LPLA) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, dividends, risk, institutional ownership and earnings.

Earnings & Valuation

This table compares T. Rowe Price and LPL Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
T. Rowe Price $4.79 billion 6.13 $1.50 billion $5.43 22.35
LPL Financial $4.28 billion 1.48 $238.86 million $3.00 23.65

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

Volatility & Risk

T. Rowe Price has a beta of 1.21, meaning that its stock price is 21% more volatile than the S&P 500. Comparatively, LPL Financial has a beta of 1.61, meaning that its stock price is 61% more volatile than the S&P 500.

Profitability

This table compares T. Rowe Price and LPL Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
T. Rowe Price 31.10% 26.93% 20.95%
LPL Financial 6.33% 31.76% 5.88%

Analyst Ratings

This is a breakdown of current recommendations and price targets for T. Rowe Price and LPL Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
T. Rowe Price 1 5 4 0 2.30
LPL Financial 0 4 6 0 2.60

T. Rowe Price currently has a consensus target price of $112.89, indicating a potential downside of 7.00%. LPL Financial has a consensus target price of $76.80, indicating a potential upside of 8.25%. Given LPL Financial’s stronger consensus rating and higher possible upside, analysts plainly believe LPL Financial is more favorable than T. Rowe Price.

Insider & Institutional Ownership

72.0% of T. Rowe Price shares are owned by institutional investors. Comparatively, 94.2% of LPL Financial shares are owned by institutional investors. 3.1% of T. Rowe Price shares are owned by company insiders. Comparatively, 2.6% of LPL Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

T. Rowe Price pays an annual dividend of $2.80 per share and has a dividend yield of 2.3%. LPL Financial pays an annual dividend of $1.00 per share and has a dividend yield of 1.4%. T. Rowe Price pays out 51.6% of its earnings in the form of a dividend. LPL Financial pays out 33.3% 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. T. Rowe Price has increased its dividend for 31 consecutive years. T. Rowe Price is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

T. Rowe Price beats LPL Financial on 10 of the 17 factors compared between the two stocks.

About T. Rowe Price

T. Rowe Price Group, Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions. It launches and manages equity and fixed income mutual funds. The firm invests in the public equity and fixed income markets across the globe. It employs fundamental and quantitative analysis with a bottom-up approach. The firm utilizes in-house and external research to make its investments. It employs socially responsible investing with a focus on environmental, social, and governance issues. It makes investment in late-stage venture capital transactions and usually invests between $3 million and $5 million. The firm was previously known as T. Rowe Group, Inc. and T. Rowe Price Associates, Inc. T. Rowe Price Group, Inc. was founded in 1937 and is based in Baltimore, Maryland, with additional offices in Colorado Springs, Colorado; Owings Mills, Maryland; San Francisco, California; Tampa, Florida; Toronto, Ontario; Hellerup, Denmark; Amsterdam, The Netherlands; Luxembourg, Grand Duchy of Luxembourg; Zurich, Switzerland; Dubai, United Arab Emirates; London, United Kingdom; Sydney, New South Wales; Hong Kong; Tokyo, Japan; Singapore; Frankfurt, Germany, Madrid, Spain, Milan, Italy, Stockholm, Sweden, Melbourne, Australia, and Amsterdam, Netherlands.

About LPL Financial

LPL Financial Holdings Inc., together with its subsidiaries, provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, retirement and 529 education savings plans, fixed income, and insurance, as well as alternative investments, such as non-traded real estate investment trusts and business development companies. The company also provides fee-based advisory platforms that provide access to mutual funds, exchange-traded funds, stocks, bonds, certain option strategies, unit investment trusts, and institutional money managers and no-load multi-manager variable annuities. In addition, it offers cash sweep programs; and retirement solutions for commission- and fee-based services that allow advisors to provide brokerage services, consultation, and advice to retirement plan sponsors. Further, the company provides other services comprising tools and services that enable advisors to maintain and grow their practices; and trust, investment management oversight, and custodial services to trusts for estates and families, as well as insurance brokerage general agency services. It offers its services to approximately 15,000 independent financial advisors, including financial advisors at approximately 700 financial institutions. The company was formerly known as LPL Investment Holdings Inc. and changed its name to LPL Financial Holdings Inc. in June 2012. LPL Financial Holdings Inc. was founded in 1968 and is based in Boston, Massachusetts.

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