Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- LPL Financial Holdings (Nasdaq: LPLA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market, LPL FINANCIAL HOLDINGS INC's return on equity exceeds that of both the industry average and the S&P 500.
- LPL FINANCIAL HOLDINGS INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LPL FINANCIAL HOLDINGS INC reported lower earnings of $1.37 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($2.32 versus $1.37).
- The gross profit margin for LPL FINANCIAL HOLDINGS INC is currently extremely low, coming in at 12.30%. Regardless of LPLA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LPLA's net profit margin of 4.42% is significantly lower than the industry average.
- Net operating cash flow has significantly decreased to -$11.63 million or 113.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.