Analyzing Donnelley Financial Solutions (NYSE:DFIN) & LPL Financial (NASDAQ:LPLA)

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

Institutional and Insider Ownership

93.8% of Donnelley Financial Solutions shares are owned by institutional investors. Comparatively, 95.7% of LPL Financial shares are owned by institutional investors. 5.2% of Donnelley Financial Solutions shares are owned by insiders. Comparatively, 0.6% of LPL Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Donnelley Financial Solutions and LPL Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donnelley Financial Solutions	0	2	2	1	2.80
LPL Financial	0	3	14	0	2.82

Donnelley Financial Solutions currently has a consensus target price of $61.00, suggesting a potential upside of 0.73%. LPL Financial has a consensus target price of $399.31, suggesting a potential upside of 42.85%. Given LPL Financial’s stronger consensus rating and higher possible upside, analysts clearly believe LPL Financial is more favorable than Donnelley Financial Solutions.

Risk and Volatility

Donnelley Financial Solutions has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500. Comparatively, LPL Financial has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500.

Earnings & Valuation

This table compares Donnelley Financial Solutions and LPL Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donnelley Financial Solutions	$777.50 million	1.91	$32.40 million	$1.45	41.76
LPL Financial	$16.99 billion	1.30	$863.02 million	$12.54	22.29

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Donnelley Financial Solutions	4.53%	25.82%	12.29%
LPL Financial	6.83%	32.36%	9.51%

Summary

LPL Financial beats Donnelley Financial Solutions on 9 of the 15 factors compared between the two stocks.

About Donnelley Financial Solutions

Donnelley Financial Solutions, Inc. provides innovative software and technology-enabled financial regulatory and compliance solutions in the United States, Asia, Europe, Canada, and internationally. It operates through four segments: Capital Markets Software Solutions (CM-SS); Capital Markets Compliance and Communications Management (CM-CCM); Investment Companies Software Solutions (IC-SS); and Investment Companies Compliance and Communications Management (IC-CCM). The CM-SS segment provides Venue and ActiveDisclosure solutions to public and private companies to manage public and private transactional and compliance processes; collaborate; and tag, validate, and file SEC documents. The CM-CCM segment offers tech-enabled services and print and distribution solutions to public and private companies for deal solutions and SEC compliance requirements. The IC-SS segment provides clients with the Arc Suite platform that contains a comprehensive suite of cloud-based solutions, including ArcDigital, ArcReporting, ArcPro, and ArcRegulatory, as well as services that enable storage and management of compliance and regulatory information in a self-service and central repository for accessing, assembling, editing, translating, rendering, and submitting documents to regulators and investors. The IC-CCM segment offers tech-enabled solutions for creating, filing and distributing regulatory communications, and solutions for investor communications, as well as XBRL and iXBRL-formatted filings pursuant for Investment Company Act through the SEC’s EDGAR system. This segment also provides turnkey proxy services, including discovery, planning and implementation, print and mail management, solicitation, tabulation services, stockholder meeting review, and expert support. Donnelley Financial Solutions, Inc. was founded in 1983 and is headquartered in Chicago, Illinois.

About LPL Financial

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 enterprises in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans, and insurance. The company also provides fee-based 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 money market products; 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; trust, investment management oversight, and custodial services for estates and families, as well as insurance brokerage general agency services; and technology products, such as proposal generation, investment analytics, and portfolio modeling. 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 1989 and is based in San Diego, California.