LPL Financial (NASDAQ:LPLA) vs. Wells Fargo & Company (NYSE:WFC) Head to Head Review

Wells Fargo & Company (NYSE:WFC) and LPL Financial (NASDAQ:LPLA) are both large-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Volatility and Risk

Wells Fargo & Company has a beta of 1.25, suggesting that its stock price is 25% more volatile than the S&P 500. Comparatively, LPL Financial has a beta of 0.61, suggesting that its stock price is 39% less volatile than the S&P 500.

Dividends

Wells Fargo & Company pays an annual dividend of $1.80 per share and has a dividend yield of 2.1%. LPL Financial pays an annual dividend of $1.20 per share and has a dividend yield of 0.4%. Wells Fargo & Company pays out 30.8% of its earnings in the form of a dividend. LPL Financial pays out 8.2% 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. Wells Fargo & Company has raised its dividend for 4 consecutive years. Wells Fargo & Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Wells Fargo & Company and LPL Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Wells Fargo & Company	$125.40 billion	2.15	$19.72 billion	$5.84	14.38
LPL Financial	$12.39 billion	2.15	$1.06 billion	$14.62	22.81

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

Analyst Recommendations

This is a breakdown of recent recommendations for Wells Fargo & Company and LPL Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wells Fargo & Company	0	8	9	0	2.53
LPL Financial	0	5	10	1	2.75

Wells Fargo & Company presently has a consensus price target of $89.57, suggesting a potential upside of 6.67%. LPL Financial has a consensus price target of $395.85, suggesting a potential upside of 18.72%. Given LPL Financial’s stronger consensus rating and higher possible upside, analysts plainly believe LPL Financial is more favorable than Wells Fargo & Company.

Insider and Institutional Ownership

75.9% of Wells Fargo & Company shares are owned by institutional investors. Comparatively, 95.7% of LPL Financial shares are owned by institutional investors. 0.1% of Wells Fargo & Company shares are owned by company insiders. Comparatively, 1.3% of LPL Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Wells Fargo & Company and LPL Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wells Fargo & Company	17.18%	12.51%	1.04%
LPL Financial	7.91%	39.80%	9.76%

Summary

LPL Financial beats Wells Fargo & Company on 12 of the 18 factors compared between the two stocks.

About Wells Fargo & Company

Wells Fargo & Co. is a diversified and community-based financial services company, which engages in the provision of banking, insurance, investments, mortgage, and consumer and commercial finance products and services. It operates through the following segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. The Consumer Banking and Lending segment offers consumer and small business banking, home lending, credit cards, auto, and personal lending. The Commercial Banking segment provides banking and credit products across industry sectors and municipalities, secured lending and lease products, and treasury management. The Corporate and Investment Banking segment is composed of corporate banking, investment banking, treasury management, commercial real estate lending and servicing, and equity and fixed income solutions, as well as sales, trading, and research capabilities. The Wealth and Investment Management segment refers to personalized wealth management, brokerage, financial planning, lending, private banking, trust, and fiduciary products and services. The company was founded by Henry Wells and William G. Fargo on March 18, 1852 and is headquartered in San Francisco, CA.

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 enterprises in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans, and insurance. The company also provides fee-based 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 money market products; 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; trust, investment management oversight, and custodial services for estates and families, as well as insurance brokerage general agency services; and technology products, such as proposal generation, investment analytics, and portfolio modeling. 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 1989 and is based in San Diego, California.