LPL Financial (LPLA) vs. Primus Guaranty (PRSG) Critical Analysis

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

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
LPL Financial $4.28 billion 1.24 $238.86 million $3.00 20.34
Primus Guaranty N/A N/A N/A N/A N/A

LPL Financial has higher revenue and earnings than Primus Guaranty.

Risk & Volatility

LPL Financial has a beta of 1.59, suggesting that its share price is 59% more volatile than the S&P 500. Comparatively, Primus Guaranty has a beta of -0.51, suggesting that its share price is 151% less volatile than the S&P 500.

Dividends

LPL Financial pays an annual dividend of $1.00 per share and has a dividend yield of 1.6%. Primus Guaranty does not pay a dividend. LPL Financial pays out 33.3% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of current ratings and target prices for LPL Financial and Primus Guaranty, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LPL Financial 0 4 7 0 2.64
Primus Guaranty 0 0 0 0 N/A

LPL Financial presently has a consensus target price of $78.20, suggesting a potential upside of 28.15%. Given LPL Financial’s higher probable upside, equities research analysts plainly believe LPL Financial is more favorable than Primus Guaranty.

Insider & Institutional Ownership

96.3% of LPL Financial shares are held by institutional investors. 2.6% of LPL Financial shares are held by company insiders. Comparatively, 3.1% of Primus Guaranty shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
LPL Financial 7.68% 41.69% 7.78%
Primus Guaranty N/A N/A N/A

Summary

LPL Financial beats Primus Guaranty on 9 of the 11 factors compared between the two stocks.

LPL Financial Company Profile

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 financial institutions in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, retirement and 529 education savings plans, fixed income, and insurance, as well as alternative investments, such as non-traded real estate investment trusts and business development companies. The company also provides fee-based advisory 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 cash sweep programs; 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; and trust, investment management oversight, and custodial services to trusts for estates and families, as well as insurance brokerage general agency services. It offers its services to approximately 15,000 independent financial advisors, including financial advisors at approximately 700 financial institutions. 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 1968 and is based in Boston, Massachusetts.

Primus Guaranty Company Profile

Primus Guaranty, Ltd., through its subsidiaries, provides credit swaps to financial institutions. It offers protection against the risk of default on primarily investment grade corporate reference entities. The company provides credit protection on a single specified reference entity, multiple reference entities, and asset-backed securities for dealers and banks. It also manages credit swap and cash investment portfolios of its affiliates, as well as provides management, consulting, and information technology services. The company was founded in 1998 and is based in Hamilton, Bermuda. As of September, 29 2014, Primus Guaranty, Ltd. is in Liquidation.

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