Critical Analysis: LPL Financial Holdings (NASDAQ:LPLA) & Cowen Group (COWN)
LPL Financial Holdings (NASDAQ: LPLA) and Cowen Group (NASDAQ:COWN) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitabiliy, earnings, risk, analyst recommendations, institutional ownership and dividends.
Volatility and Risk
LPL Financial Holdings has a beta of 1.82, meaning that its stock price is 82% more volatile than the S&P 500. Comparatively, Cowen Group has a beta of 1.67, meaning that its stock price is 67% more volatile than the S&P 500.
This table compares LPL Financial Holdings and Cowen Group’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|LPL Financial Holdings||4.65%||25.04%||4.31%|
This is a breakdown of current ratings and price targets for LPL Financial Holdings and Cowen Group, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|LPL Financial Holdings||1||4||3||1||2.44|
LPL Financial Holdings currently has a consensus price target of $42.44, indicating a potential downside of 4.68%. Cowen Group has a consensus price target of $17.00, indicating a potential upside of 3.98%. Given Cowen Group’s higher possible upside, analysts plainly believe Cowen Group is more favorable than LPL Financial Holdings.
Earnings & Valuation
This table compares LPL Financial Holdings and Cowen Group’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|LPL Financial Holdings||$4.08 billion||0.99||$522.98 million||$2.09||21.31|
|Cowen Group||$399.60 million||1.11||-$19.55 million||($0.72)||-22.71|
LPL Financial Holdings has higher revenue and earnings than Cowen Group. Cowen Group 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.
Institutional and Insider Ownership
90.8% of LPL Financial Holdings shares are held by institutional investors. Comparatively, 88.9% of Cowen Group shares are held by institutional investors. 5.7% of LPL Financial Holdings shares are held by insiders. Comparatively, 4.9% of Cowen Group shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
LPL Financial Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 2.2%. Cowen Group does not pay a dividend. LPL Financial Holdings pays out 47.8% of its earnings in the form of a dividend.
LPL Financial Holdings beats Cowen Group on 13 of the 16 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 Cowen Group
Cowen Inc., formerly Cowen Group, Inc., is a financial services company. The Company provides alternative investment management, investment banking, research, sales and trading, and prime brokerage services. It operates through two segments: alternative investment and broker-dealer. The alternative investment segment includes private equity structures, registered investment companies and listed investment vehicles. The broker-dealer segment offers industry focused investment banking for growth-oriented companies, including advisory and global capital markets origination and domain knowledge-driven research, and a sales and trading platform for institutional investors. Its alternative investment platform, which operates under the Ramius name, offers investment products and solutions across the liquidity spectrum to institutional and private clients. Ramius offers investors access to strategies to meet their specific needs, including long/short equity and event driven equity.
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