LPL Financial Holdings Inc. (LPLA): what the price requires
At today's price, LPL Financial Holdings Inc. (LPLA) is priced for +16.7% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/LPLA
Headline
| Field | Value |
|---|---|
| Ticker | LPLA |
| Company | LPL Financial Holdings Inc. |
| Current price | $319.36/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | fee-financial |
| Implied earnings growth | 16.7% |
| Price-to-earnings | 29.6x |
| Earnings yield | 3.4% |
Solve inputs: computed at a 9.9% cost of equity with 4% terminal growth over a 5-year stage, on a 5-year median GAAP earnings base; each 1pp of cost of equity moves the implied earnings growth ~4.5pp.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.23σ |
| cohort percentile (of 49 peers) | 82 |
| sustained it ~5 years at this level | 34% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.22x | 4 | expensive |
| Earnings | 2.66x | 1 | expensive |
| Relative | 0.94x | 2 | justifies |
| Growth | 0.76x | 1 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.
Per-Model Detail (n=8)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $0.00 | — | no | Negative/zero FCF — equity value floored at $0 |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $227.94 | 1.40x | yes | P/E 16.96x (blended: static sector reference 12x + trailing (TTM) 29x), scenarios: 13.6x / 17.0x / 20.4x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $121.06 | 2.64x | yes | BV/sh $70.68, ROE (TTM) 15.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $156.45 | 2.04x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $421.06 | 0.76x | yes | Rev $18.3B, growth 30% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.4x / 1.7x (bear / base = today's held flat / bull, cap 12x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $159.29 | 2.00x | yes | BV $70.68 + 5yr PV of (ROE (TTM) 15.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $132.92 | 2.40x | yes | √(22.5 × EPS $11.11 × BVPS $70.68) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $9.31 | 34.30x | yes | EPS $11.11 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $680.88 | 0.47x | yes | Revenue $18.26B × sector P/S 3.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $120.11 | 2.66x | yes | EPS $11.11 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $6.1b |
| Net debt / NOPAT (after-tax) | 6.66x |
| Net debt / operating income (pre-tax) | 4.90x |
| Interest coverage | 3.1x |
| Share count CAGR (buyback) | -0.3% |
| Burning cash | yes |
Bullet Takeaways
- LPL is an advisor-recruiting and asset-gathering platform, not a balance-sheet financial: it earns fees on $2.34 trillion of advisory and brokerage assets, which grew from $1.79 trillion a year earlier on organic recruiting and the Commonwealth acquisition.
- The biggest risk is the premium multiple meeting a slowdown: conservative earnings and book-value methods value the stock near $120 to $160, well below the price, so the bet depends on continued high-velocity asset growth and on rate-sensitive client-cash revenue holding up.
- Watch Commonwealth retention and organic net new assets: retention sits in the mid-80s percent against a 90% target, and every point of shortfall is acquired assets that never produce the fees the deal assumed.
Bull Case
The standard valuation lens reads LPL as expensive, and it misses what the business actually is. Earnings-power and book-value methods treat the company as a financial that should trade near a multiple of its accounting capital, but LPL is not in the business of putting its own balance sheet at risk. It is the platform on which independent financial advisors run their practices, and it earns fees on the assets those advisors bring. Advisory and brokerage assets reached $2.34 trillion at the end of the first quarter of 2026, up from $1.79 trillion a year earlier. The asset that matters here is not on the balance sheet; it is the advisor relationships and the assets they custody, and that asset is compounding.
The growth engine is advisor recruiting, and it is running. In the first quarter LPL added roughly $21 billion of organic net new assets, a 4% annualized pace, even with softer equity markets pulling down period-end balances. The 10-K frames the strategy in its own words, citing "Attracting New Assets to Our Platform" and the expansion of "business services and planning and advice services" as sources of organic growth as more advisors adopt them. Each advisor who moves to LPL brings a book of client assets that then generates recurring advisory fees, and the newer affiliation models, the supported-independence and enhanced RIA offerings, widen the funnel to advisors who would not have joined a pure independent broker-dealer.
The Commonwealth Financial Network acquisition is the largest deal in the company's history and the clearest expression of the strategy. Closed in August 2025, it brought roughly $320 billion in client assets and about 3,000 advisors onto the platform, and management reports retention tracking in the mid-80s percent toward a 90% target. Revenue grew 35% year over year to $4.94 billion in the quarter, with net income of $356.4 million and diluted earnings of $4.43 per share, up from $4.24. A platform that keeps the advisors it recruits and grows the assets they manage is the kind of compounding the asset-based methods structurally cannot capture, because the value lives in the recurring fee stream, not the book equity.
Bear Case
The valuation methods disagree sharply, and the conservative ones are likely the more honest read. At nearly $294 (June 27, 2026), the stock is pricing in continued high-velocity asset and advisor growth, not the steadier economics those conservative methods describe. The bet embedded in the price is that the recruiting machine keeps running at recent pace; if it slows, the methods that justify the price lose their support and the ones that find it expensive become the relevant frame.
The cash-flow sensitivity is a real fragility that the headline growth obscures. A meaningful share of LPL's earnings comes from the interest it earns on client cash balances, and that revenue moves with the level of short-term rates and the size of cash sweep balances. The 10-K lists "success in managing client cash program fees" among its key risk drivers, alongside "fluctuations in the levels of advisory and brokerage assets, including net new assets". When rates fall or advisors move client cash into higher-yielding products, that high-margin revenue compresses, and it compresses faster than the advisory fee base grows. The market is paying a premium multiple for a business with a rate-sensitive profit engine the company does not control.
The Commonwealth integration is the execution risk that could undercut the thesis. The deal brought 3,000 advisors and $320 billion in assets, but retention is currently in the mid-80s percent against a 90% target, meaning a non-trivial slice of the acquired book is still at risk of walking. Integrations of advisor platforms are won or lost on whether the acquired advisors stay, and every percentage point of retention shortfall is assets that never generate the fees the purchase price assumed. The balance sheet carries net debt of about $6 billion, roughly five times operating income, with interest coverage around three times, so the company has used leverage to fund its growth and has less room to absorb a recruiting slowdown or an integration stumble than the premium multiple implies.
Valuation
The price is best understood as a bet on the platform's growth rate, because that is the only frame under which it holds together. The methods divide cleanly: the relative-multiple lens, blending the sector and the company's own trailing multiple, lands near the price, and the forward-growth method reaches above it. The asset-based and earnings-power methods read the stock as expensive, with capitalized trailing earnings near $120 and book-value-plus-profitability methods in the $120 to $160 range. That split is the signal. This is not a value situation where cheap static methods anchor the price; it is a growth-premium situation where the price requires the recruiting and asset-gathering momentum to persist.
For a fee-based financial, the right lens is the recurring revenue on assets served, not the company's own book equity. LPL earns fees on $2.34 trillion of advisory and brokerage assets, and the value of that stream depends on the asset base growing and the advisors staying. The earnings-power methods that find the stock expensive are valuing the trailing profit without crediting the forward growth, which is why they sit below the price; the growth method that reaches the price credits continued asset gathering at recent rates. The honest reconciliation is that the buyer is underwriting the higher growth path, and the conservative methods describe the floor if that growth normalizes toward the steadier economics of a mature platform.
The balance sheet bears on the downside in a way that matters for a leveraged grower. Net debt of about $6 billion against trailing operating income near $1.24 billion is roughly five times operating income, with interest coverage around three times, so the company has financed its expansion with real debt. The share count has been roughly flat. The key vulnerability is not solvency, which the coverage supports, but the rate-sensitive client-cash revenue layered on top of the advisory fees: a decline in short-term rates would pressure earnings independently of how many advisors LPL recruits. The decisive variable for this name is whether organic net new assets and Commonwealth retention hold, since those are what the premium over the conservative methods is paying for.
Catalysts
First-quarter 2026 results, reported in late April, showed the platform compounding. Total revenue rose 35% year over year to $4.94 billion, net income reached $356.4 million, and diluted earnings per share came in at $4.43 against $4.24 a year earlier. Advisory and brokerage assets hit $2.34 trillion, organic net new assets were about $21 billion at a 4% annualized pace, and the expanded affiliation models added roughly $2 billion in recruited assets.
The Commonwealth Financial Network integration is the dominant near-term catalyst. The deal, LPL's largest, closed in August 2025 and brought roughly $320 billion in client assets and about 3,000 advisors, with retention currently in the mid-80s percent and management targeting 90%. For 2026 the company guided core general and administrative expense to $2,155 to $2,190 million, including $380 to $390 million tied to the Commonwealth integration, implying roughly 4.5% to 6% growth. The catalysts that move the thesis are the quarterly net-new-asset pace, the Commonwealth retention figure climbing toward target, and the trajectory of short-term rates, which sets the client-cash revenue that flows alongside the advisory fees.
Peer Cohorts (Per Segment, With Filing Citations)
Investment & advisory services (consolidated) (reported)
- RJF (RAYMOND JAMES FINANCIAL INC)
- (no filing in the citation store)
- SF (STIFEL FINANCIAL CORP)
- (no filing in the citation store)
- SCHW (SCHWAB CHARLES CORP)
- (no filing in the citation store)
- MS (MORGAN STANLEY)
- (no filing in the citation store)
- NMR (NOMURA HOLDINGS INC)
- (no filing in the citation store)
- BGC (BGC Group, Inc.)
- (no filing in the citation store)
- VIRT (Virtu Financial, Inc.)
- (no filing in the citation store)
- BLK (BlackRock, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
LPL Q1 FY2026 results, April 2026 · LPL Q1 FY2026 guidance, April 2026