Here's Why We Think LPL Financial Holdings (NASDAQ:LPLA) Might Deserve Your Attention Today
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like LPL Financial Holdings (NASDAQ:LPLA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide LPL Financial Holdings with the means to add long-term value to shareholders.
See our latest analysis for LPL Financial Holdings
How Quickly Is LPL Financial Holdings Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that LPL Financial Holdings has managed to grow EPS by 36% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of LPL Financial Holdings shareholders is that EBIT margins have grown from 12% to 18% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of LPL Financial Holdings' forecast profits?
Are LPL Financial Holdings Insiders Aligned With All Shareholders?
Owing to the size of LPL Financial Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$126m. We note that this amounts to 0.7% of the company, which may be small owing to the sheer size of LPL Financial Holdings but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.
Should You Add LPL Financial Holdings To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into LPL Financial Holdings' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in LPL Financial Holdings' continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. However, before you get too excited we've discovered 2 warning signs for LPL Financial Holdings that you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
