Analyzing LPL Financial (NASDAQ:LPLA) and Donnelley Financial Solutions (NYSE:DFIN)

LPL Financial (NASDAQ:LPLA) and Donnelley Financial Solutions (NYSE:DFIN) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and recommmendations for LPL Financial and Donnelley Financial Solutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LPL Financial	0	3	14	0	2.82
Donnelley Financial Solutions	0	2	2	1	2.80

LPL Financial presently has a consensus price target of $409.69, indicating a potential upside of 29.81%. Donnelley Financial Solutions has a consensus price target of $61.00, indicating a potential upside of 9.34%. Given LPL Financial’s stronger consensus rating and higher possible upside, equities research analysts clearly believe LPL Financial is more favorable than Donnelley Financial Solutions.

Profitability

This table compares LPL Financial and Donnelley Financial Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LPL Financial	5.13%	32.20%	9.35%
Donnelley Financial Solutions	4.53%	25.82%	12.29%

Insider and Institutional Ownership

95.7% of LPL Financial shares are owned by institutional investors. Comparatively, 93.8% of Donnelley Financial Solutions shares are owned by institutional investors. 0.6% of LPL Financial shares are owned by insiders. Comparatively, 5.2% of Donnelley Financial Solutions shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares LPL Financial and Donnelley Financial Solutions”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LPL Financial	$19.61 billion	1.27	$863.02 million	$12.54	25.17
Donnelley Financial Solutions	$767.00 million	1.79	$32.40 million	$1.45	38.48

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

Risk and Volatility

LPL Financial has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500. Comparatively, Donnelley Financial Solutions has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.

Summary

LPL Financial beats Donnelley Financial Solutions on 9 of the 15 factors compared between the two stocks.

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.

About Donnelley Financial Solutions

Donnelley Financial Solutions, Inc. provides innovative software and technology-enabled financial regulatory and compliance solutions in the United States, Asia, Europe, Canada, and internationally. It operates through four segments: Capital Markets Software Solutions (CM-SS); Capital Markets Compliance and Communications Management (CM-CCM); Investment Companies Software Solutions (IC-SS); and Investment Companies Compliance and Communications Management (IC-CCM). The CM-SS segment provides Venue and ActiveDisclosure solutions to public and private companies to manage public and private transactional and compliance processes; collaborate; and tag, validate, and file SEC documents. The CM-CCM segment offers tech-enabled services and print and distribution solutions to public and private companies for deal solutions and SEC compliance requirements. The IC-SS segment provides clients with the Arc Suite platform that contains a comprehensive suite of cloud-based solutions, including ArcDigital, ArcReporting, ArcPro, and ArcRegulatory, as well as services that enable storage and management of compliance and regulatory information in a self-service and central repository for accessing, assembling, editing, translating, rendering, and submitting documents to regulators and investors. The IC-CCM segment offers tech-enabled solutions for creating, filing and distributing regulatory communications, and solutions for investor communications, as well as XBRL and iXBRL-formatted filings pursuant for Investment Company Act through the SEC’s EDGAR system. This segment also provides turnkey proxy services, including discovery, planning and implementation, print and mail management, solicitation, tabulation services, stockholder meeting review, and expert support. Donnelley Financial Solutions, Inc. was founded in 1983 and is headquartered in Chicago, Illinois.