LPL Financial Holdings (NASDAQ: LPLA) and GAIN Capital Holdings (NYSE:GCAP) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent recommendations for LPL Financial Holdings and GAIN Capital Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LPL Financial Holdings 1 2 4 1 2.63
GAIN Capital Holdings 0 1 1 0 2.50

LPL Financial Holdings currently has a consensus price target of $49.25, indicating a potential downside of 0.53%. GAIN Capital Holdings has a consensus price target of $7.75, indicating a potential upside of 21.09%. Given GAIN Capital Holdings’ higher probable upside, analysts clearly believe GAIN Capital Holdings is more favorable than LPL Financial Holdings.

Valuation & Earnings

This table compares LPL Financial Holdings and GAIN Capital Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
LPL Financial Holdings $4.13 billion 1.08 $560.84 million $2.30 21.53
GAIN Capital Holdings $336.67 million 0.90 $10.87 million $0.23 27.83

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

Profitability

This table compares LPL Financial Holdings and GAIN Capital Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LPL Financial Holdings 5.10% 26.45% 4.70%
GAIN Capital Holdings 3.21% 2.85% 0.56%

Dividends

LPL Financial Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 2.0%. GAIN Capital Holdings pays an annual dividend of $0.24 per share and has a dividend yield of 3.8%. LPL Financial Holdings pays out 43.5% of its earnings in the form of a dividend. GAIN Capital Holdings pays out 104.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

89.7% of LPL Financial Holdings shares are owned by institutional investors. Comparatively, 53.5% of GAIN Capital Holdings shares are owned by institutional investors. 4.0% of LPL Financial Holdings shares are owned by insiders. Comparatively, 5.0% of GAIN Capital Holdings shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

LPL Financial Holdings has a beta of 1.84, indicating that its share price is 84% more volatile than the S&P 500. Comparatively, GAIN Capital Holdings has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500.

Summary

LPL Financial Holdings beats GAIN Capital Holdings on 13 of the 17 factors compared between the two stocks.

LPL Financial Holdings 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.

GAIN Capital Holdings Company Profile

GAIN Capital Holdings, Inc. (GAIN) is a provider of trading services and solutions, specializing in over-the-counter (OTC) and exchange-traded markets. The Company’s segments include Retail segment, Institutional segment and Futures segment. Through its retail segment, the Company provides its retail customers across the world with access to a range of global financial markets, including spot forex, precious metals, spread bets and contracts for difference (CFDs) on commodities, indices, individual equities and interest rate products, as well OTC options on forex. Its institutional segment provides agency execution services and offers electronic access to spot and forward foreign exchange and precious metals markets through Electronic Communications Network (ECN), through its GTX platform. Its futures segment offers execution and risk management services for exchange-traded futures and futures options on the United States and European exchanges.

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