Which Is a Better Investment, LPL Financial Holdings Inc or Charles Schwab Corp Stock? (2024)

Sifting through countless of stocks in the Investment Banking & Brokerage Services industry can be tedious, and sometimes two stocks are just too similar to judge which is the better investment. If you’re on the fence about investing in Charles Schwab Corp or LPL Financial Holdings Inc because you’re not sure how they measure up, it’s important to compare them on a few factors before making your decision.

Read on to learn how Charles Schwab Corp and LPL Financial Holdings Inc compare based on key financial metrics to determine which better meets your investment needs.

The Charles Schwab Corporation is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, and retirement business services, to independent registered investment advisors, independent retirement advisors, and recordkeepers. Its products and services include brokerage, mutual funds, exchange-traded funds, advice solutions, alternative investments, banking and trust.

LPL Financial Holdings Inc. is an independent broker-dealer and an investment advisory firm company. The Company offers an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at enterprises (collectively, advisors) in the United States. Through its comprehensive platform, it offers integrated technology solutions; brokerage and advisory platforms; clearing, compliance, business and planning and advice services; consultative practice management programs and training, and in-house research. Through its custody and clearing platform, using both proprietary and third-party technology, the Company offers access to diversified financial products and services, enabling its advisors to offer personalized financial advice and brokerage services to retail investors. Its products include alternative investments, annuities, exchange-traded products, insurance-based products, mutual funds, and retirement plan products.

As of September 12, 2024, Charles Schwab Corp had a $116.0 billion market capitalization, compared to the Investment Banking & Brokerage Services median of $4.8 million. Charles Schwab Corp’s stock is NA in 2024, NA in the previous five trading days and up 2.02% in the past year.

Currently, Charles Schwab Corp’s price-earnings ratio is 25.1. Charles Schwab Corp’s trailing 12-month revenue is $25.5 billion with a 17.3% net profit margin. Year-over-year quarterly sales growth most recently was -1.9%. Analysts expect adjusted earnings to reach $3.038 per share for the current fiscal year. Charles Schwab Corp currently has a 1.6% dividend yield.

Currently, LPL Financial Holdings Inc’s price-earnings ratio is 16.1. LPL Financial Holdings Inc’s trailing 12-month revenue is $10.9 billion with a 8.9% net profit margin. Year-over-year quarterly sales growth most recently was 18.8%. Analysts expect adjusted earnings to reach $15.962 per share for the current fiscal year. LPL Financial Holdings Inc currently has a 0.6% dividend yield.

Stock evaluation requires access to huge amounts of data and the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movements. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors streamline and work through such data.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A‐F grades for each of five key investing factors: value, growth, momentum, earnings estimate revisions and quality. Here, we’ll take a closer look at Charles Schwab Corp and LPL Financial Holdings Inc’s stock grades to see how they measure up against one another.

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The foundation of growth investing is seeking out stocks of companies exhibiting strong, consistent and prolonged growth that is expected to continue into the future.

In order to compute the growth score and assign it a letter grade, the percentile ranks for each of three components‐consistency of annual sales growth, five-year sales growth rankings adjusted for extreme levels, and consistency of positive annual cash from operations‐must be determined. These three rank figures are added together, and the sum is ranked against the entire stock universe to arrive at a company’s Growth Score to create an equal distribution of grades.

The companies in the bottom 20% of the stock universe receive Growth Grades of F, considered to be very weak, while those in the top 20% receive A grades, which are considered very strong.

Charles Schwab Corp has a Growth Score of 94, which is Very Strong. LPL Financial Holdings Inc has a Growth Score of 94, which is Very Strong.

Looking at the Growth Grade breakdown above, both Charles Schwab Corp and LPL Financial Holdings Inc have a grade of A. For investors who focus solely on a company’s upward growth, further research should be conducted into both companies’ other financial metrics before deciding whether to invest.

Like the Value Grade, AAII’s A+ Investor Quality Grade comes from the percentile rank of key metrics. Specifically, the Quality Score is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit relative to assets, buyback yield, change in total liabilities to assets, accruals, Z double prime bankruptcy risk (Z) score and the F-Score.

The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the remaining measures that are valid. To be assigned a Quality Score, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.

The Quality Score is used to assess the underlying “quality” of a particular stock. A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades over the period of 1998 through 2019.

Stocks receive better grades (higher scores) for having higher scores for the quality subcomponents and worse grades (lower scores) for lower scores for the subcomponents.

Charles Schwab Corp has a Quality Score of 61, which is Strong. LPL Financial Holdings Inc has a Quality Score of 81, which is Very Strong.

Momentum grades help to uncover stocks experiencing anomalously high rates of return; research finds that stocks with high relative levels of momentum tend to outperform, whereas those with low levels of momentum tend to continue underperforming. Momentum is based on the price change of a stock over a specified period relative to all other stocks.

Typically, AAII looks at the weighted relative strength over the trailing four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters. The most recent quarterly price change is given a weight of 40% and each of the three previous quarters are given a weighting of 20%.

Charles Schwab Corp has a Momentum Score of 40, which is Weak. LPL Financial Holdings Inc has a Momentum Score of 27, which is Weak.

Earnings estimate revisions scores take into account the magnitude of a company’s earnings surprise in its last two reported fiscal quarters. Often, surprises beget further surprises‐or at least continued sales growth (the exact opposite is generally true, too).

Successful stock investing involves buying low and selling high, so stock valuation is an important consideration for stock selection. Buying stocks that are going to go up typically means buying stocks that are undervalued in the first place, although momentum investors may argue that point.

These 2 key factors, when combined with the above, provide a holistic view into a particular stock. Further, by joining A+ Investor you can see whether Charles Schwab Corp and LPL Financial Holdings Inc pass any of our 60+ stock screens that have outperformed the market since their creation.

Overall, Charles Schwab Corp stock has a Growth Score of 94, Momentum Score of 40 and Quality Score of 61.

LPL Financial Holdings Inc stock has a Growth Score of 94, Momentum Score of 27 and Quality Score of 81.

Comparing Charles Schwab Corp and LPL Financial Holdings Inc’s grades, scores and metrics can act as a solid basis to determine whether they may be a good investment or not. You’ll also want to look at your portfolio’s asset allocation as well as your risk tolerance and financial goals to see if either of these stocks would make a good fit for you. AAII can help you figure out which investments align with your individual needs and preferences.

Investors are encouraged to do their own due diligence and research. In this way, individuals can effectively become managers of their own assets‐without having to rely on others for financial independence. You can count on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis.

A+ Investor adds to our qualitative teaching with a powerful data suite to help you whittle down investment choices to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.