Trade-Ideas: LPL Financial Holdings (LPLA) Is Today's

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.

Trade-Ideas LLC identified LPL Financial Holdings ( LPLA) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified LPL Financial Holdings as such a stock due to the following factors:

  • LPLA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.0 million.
  • LPLA has traded 848,446 shares today.
  • LPLA traded in a range 213.2% of the normal price range with a price range of $1.47.
  • LPLA traded above its daily resistance level (quality: 67 days, meaning that the stock is crossing a resistance level set by the last 67 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on LPLA:

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. The stock currently has a dividend yield of 2.4%. LPLA has a PE ratio of 24. Currently there are 2 analysts that rate LPL Financial Holdings a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for LPL Financial Holdings has been 1.3 million shares per day over the past 30 days. LPL Financial has a market cap of $4.1 billion and is part of the financial sector and financial services industry. The stock has a beta of 0.96 and a short float of 15.9% with 11.46 days to cover. Shares are down 1.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates LPL Financial Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LPL FINANCIAL HOLDINGS INC increased its bottom line by earning $1.75 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.59 versus $1.75).
  • Net operating cash flow has significantly increased by 69.77% to $145.64 million when compared to the same quarter last year. Despite an increase in cash flow of 69.77%, LPL FINANCIAL HOLDINGS INC is still growing at a significantly lower rate than the industry average of 190.26%.
  • LPLA has underperformed the S&P 500 Index, declining 10.64% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.

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