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LPL Financial’s FVE Increased to $294

We believe gross profit in 2023 could increase over 30%, as the company benefits from continued high interest rates.

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Securities In This Article
LPL Financial Holdings Inc
(LPLA)

We are increasing our fair value estimate for narrow-moat LPL Financial LPLA to $294 from $256 per share. Our fair value estimate correlates to a price/forward earnings multiple of 13 times and an enterprise value/EBITDA multiple of 9 times. Of the net $38 increase in our fair value estimate, about $14 is from the time value of money since our previous valuation update with the remainder about split among changes in our client cash-related revenue, expense forecasts, and a 50-basis-point decrease in our cost of capital assumption. We believe gross profit in 2023 could increase over 30%, as the company benefits from continued high interest rates. However, when the U.S. Federal Reserve begins to lower interest rates due to a successful soft landing or to combat a recession, gross profit growth will likely have several years of being in the low-single digits, if not being slightly negative.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Michael Wong, CFA

Sector Director
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 WealthManagement.com Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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