Contrasting Ameriprise Financial (AMP) and LPL Financial (LPLA)

Ameriprise Financial (NYSE: AMP) and LPL Financial (NASDAQ:LPLA) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, earnings, institutional ownership, risk, profitability, valuation and analyst recommendations.

Insider & Institutional Ownership

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86.7% of Ameriprise Financial shares are held by institutional investors. Comparatively, 93.6% of LPL Financial shares are held by institutional investors. 1.5% of Ameriprise Financial shares are held by company insiders. Comparatively, 4.0% of LPL Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Ameriprise Financial and LPL Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ameriprise Financial $12.03 billion 1.91 $1.48 billion $9.44 16.64
LPL Financial $4.28 billion 1.39 $238.86 million $2.58 25.57

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

Profitability

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

Net Margins Return on Equity Return on Assets
Ameriprise Financial 12.31% 31.03% 1.33%
LPL Financial 5.58% 29.42% 5.41%

Analyst Ratings

This is a breakdown of current recommendations for Ameriprise Financial and LPL Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ameriprise Financial 0 4 3 0 2.43
LPL Financial 0 3 6 1 2.80

Ameriprise Financial currently has a consensus price target of $164.43, suggesting a potential upside of 4.66%. LPL Financial has a consensus price target of $68.40, suggesting a potential upside of 3.70%. Given Ameriprise Financial’s higher possible upside, research analysts clearly believe Ameriprise Financial is more favorable than LPL Financial.

Dividends

Ameriprise Financial pays an annual dividend of $3.32 per share and has a dividend yield of 2.1%. LPL Financial pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. Ameriprise Financial pays out 35.2% of its earnings in the form of a dividend. LPL Financial pays out 38.8% 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. Ameriprise Financial has raised its dividend for 8 consecutive years. Ameriprise Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Ameriprise Financial has a beta of 1.84, meaning that its share price is 84% more volatile than the S&P 500. Comparatively, LPL Financial has a beta of 1.59, meaning that its share price is 59% more volatile than the S&P 500.

Summary

Ameriprise Financial beats LPL Financial on 11 of the 18 factors compared between the two stocks.

Ameriprise Financial Company Profile

Ameriprise Financial, Inc. is a financial services company that offers financial solutions to individual and institutional clients. The Company operates in five segments: Advice & Wealth Management; Asset Management; Annuities; Protection, and Corporate & Other. The Company uses Ameriprise Financial as its enterprise brand, as well as the name of its advisor network and certain of its retail products and services. The retail products and services that use the Ameriprise Financial brand include those that it provides through its advisors (financial planning, investment advisory accounts and retail brokerage services) and products and services that the Company markets directly to consumers or through affinity groups (personal auto and home insurance). The Company uses its RiverSource brand for its annuity and protection products issued by the RiverSource Life companies, including its life and disability income insurance products.

LPL Financial Company Profile

LPL Financial Holdings Inc. is a broker-dealer, a custodian for registered investment advisors and an independent consultant to retirement plans. The Company provides a platform of brokerage and investment advisory services to independent financial advisors, including financial advisors at financial institutions across the country. It also supported approximately 4,000 financial advisors, affiliated and licensed with insurance companies through customized clearing services, advisory platforms and technology solutions, as of December 31, 2016. Through its advisors, it is a distributor of financial products and services in the United States. It provides its technology and service to advisors through a technology platform that is server-based and Web-accessible. Its technology offerings are designed to permit its advisors to manage various aspects of their businesses. It automates time-consuming processes, such as account opening and management, document imaging and account rebalancing.

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