Here's Why We Think LPL Financial Holdings (NASDAQ:LPLA) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like LPL Financial Holdings (NASDAQ:LPLA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for LPL Financial Holdings

How Fast Is LPL Financial Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that LPL Financial Holdings has managed to grow EPS by 25% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. LPL Financial Holdings shareholders can take confidence from the fact that EBIT margins are up from 9.9% to 17%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for LPL Financial Holdings' future profits.

Are LPL Financial Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$15b company like LPL Financial Holdings. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$119m. While that is a lot of skin in the game, we note this holding only totals to 0.8% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Is LPL Financial Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into LPL Financial Holdings' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Before you take the next step you should know about the 2 warning signs for LPL Financial Holdings that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.