Head to Head Survey: CME Group (CME) and LPL Financial (LPLA)

CME Group (NASDAQ: CME) and LPL Financial (NASDAQ:LPLA) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their earnings, valuation, risk, institutional ownership, dividends, profitability and analyst recommendations.

Profitability

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

Net Margins Return on Equity Return on Assets
CME Group 111.45% 8.48% 2.43%
LPL Financial 6.33% 31.76% 5.88%

Analyst Ratings

This is a summary of recent ratings and recommmendations for CME Group and LPL Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CME Group 0 3 10 0 2.77
LPL Financial 0 4 6 0 2.60

CME Group currently has a consensus target price of $164.46, indicating a potential upside of 2.93%. LPL Financial has a consensus target price of $76.80, indicating a potential upside of 8.98%. Given LPL Financial’s higher probable upside, analysts clearly believe LPL Financial is more favorable than CME Group.

Earnings & Valuation

This table compares CME Group and LPL Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CME Group $3.64 billion 14.88 $4.06 billion $4.77 33.50
LPL Financial $4.28 billion 1.47 $238.86 million $3.00 23.49

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

Dividends

CME Group pays an annual dividend of $2.80 per share and has a dividend yield of 1.8%. LPL Financial pays an annual dividend of $1.00 per share and has a dividend yield of 1.4%. CME Group pays out 58.7% of its earnings in the form of a dividend. LPL Financial pays out 33.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Risk and Volatility

CME Group has a beta of 0.57, meaning that its share price is 43% less volatile than the S&P 500. Comparatively, LPL Financial has a beta of 1.61, meaning that its share price is 61% more volatile than the S&P 500.

Institutional & Insider Ownership

83.1% of CME Group shares are owned by institutional investors. Comparatively, 96.2% of LPL Financial shares are owned by institutional investors. 0.6% of CME Group shares are owned by insiders. Comparatively, 2.6% of LPL Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

About CME Group

CME Group Inc., through its subsidiaries, operates contract markets for the trading of futures and options on futures contracts worldwide. It offers a range of products across various asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products, and metals. The company executes trade through its electronic trading platforms, open outcry, and privately negotiated transactions, as well as provides hosting, connectivity, and customer support for electronic trading through its co-location services. It also provides clearing and settlement services for exchange-traded contracts, as well as for cleared swaps; and regulatory reporting solutions for market participants through its repository services in the United States, the United Kingdom, Canada, and Australia. In addition, the company offers a range of market data services, including live quotes, delayed quotes, market reports, and historical data services, as well as index services. It serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group Inc. was founded in 1898 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 financial institutions in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, retirement and 529 education savings plans, fixed income, and insurance, as well as alternative investments, such as non-traded real estate investment trusts and business development companies. The company also provides fee-based advisory 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 cash sweep programs; 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; and trust, investment management oversight, and custodial services to trusts for estates and families, as well as insurance brokerage general agency services. It offers its services to approximately 15,000 independent financial advisors, including financial advisors at approximately 700 financial institutions. 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 1968 and is based in Boston, Massachusetts.

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