LPLA - Embedded Expectations Analysis - 2021 08 26
LPL Financial Holdings Inc. (LPLA:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 20.9x Uniform P/E. Even at these levels, the market is pricing in bearish expectations for the firm. However, given management's optimism about their advisory platform, growth rate, and institutional market opportunities, market expectations are overly bearish, suggesting outperformance remains warranted.Specifically, generated an excitement marker when saying their advisory platform provides financial advisors the capability to provide expanded advice or enhanced value to end clients. In addition, they are confident continued sales strength improved organic growth to over 12%, there is a market opportunity to serve large institutions, and their Business Solutions offerings help free up additional time for advisors. Furthermore, they are confident earning a bank charter is unnecessary as they can deliver products and capabilities that matter to advisors and clients without one.
Given management's optimism about their advisory platform, growth rate, and institutional market opportunities, market expectations are overly bearish and equity upside is warranted for LPLA.
LPL Financial Holdings is a holding company. Through its subsidiaries, the company is engaged in the retail financial advice market and independent broker-dealer. The company's product and solution access includes: Commission-Based Products, which include variable and fixed annuities, mutual funds, equities, and insurance, among others; Fee-Based Advisory Platforms and Support, which include wrap-fee programs, mutual fund asset allocation programs, financial planning services, and retirement plan consulting services; and Cash Sweep Programs, which manage their clients' cash balances through a money market sweep vehicle involving money market fund providers and insured sweep vehicles involving banks.
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