Analyzing LPL Financial (NASDAQ:LPLA) & Bank of America (NYSE:BAC)

Bank of America (NYSE:BAC) and LPL Financial (NASDAQ:LPLA) are both large-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, valuation, dividends, risk, institutional ownership, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent ratings and target prices for Bank of America and LPL Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of America	0	5	17	0	2.77
LPL Financial	1	3	10	0	2.64

Bank of America presently has a consensus price target of $52.78, indicating a potential upside of 4.16%. LPL Financial has a consensus price target of $389.38, indicating a potential upside of 22.83%. Given LPL Financial’s higher probable upside, analysts clearly believe LPL Financial is more favorable than Bank of America.

Institutional & Insider Ownership

70.7% of Bank of America shares are held by institutional investors. Comparatively, 95.7% of LPL Financial shares are held by institutional investors. 0.3% of Bank of America shares are held by company insiders. Comparatively, 1.3% of LPL Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Bank of America and LPL Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of America	$192.43 billion	1.95	$27.13 billion	$3.42	14.81
LPL Financial	$12.39 billion	2.05	$1.06 billion	$14.62	21.68

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

Dividends

Bank of America pays an annual dividend of $1.12 per share and has a dividend yield of 2.2%. LPL Financial pays an annual dividend of $1.20 per share and has a dividend yield of 0.4%. Bank of America pays out 32.7% 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. Bank of America has increased its dividend for 11 consecutive years. Bank of America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Bank of America has a beta of 1.33, suggesting that its stock price is 33% 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.

Profitability

This table compares Bank of America and LPL Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of America	14.81%	10.25%	0.84%
LPL Financial	7.91%	39.80%	9.76%

Summary

LPL Financial beats Bank of America on 9 of the 17 factors compared between the two stocks.

About Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.

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.