OTC Markets Group (OTCMKTS:OTCM) and LPL Financial (NASDAQ:LPLA) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, institutional ownership, earnings and risk.

Insider & Institutional Ownership

0.0% of OTC Markets Group shares are owned by institutional investors. Comparatively, 94.6% of LPL Financial shares are owned by institutional investors. 2.6% of LPL Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

OTC Markets Group pays an annual dividend of $0.60 per share and has a dividend yield of 2.0%. LPL Financial pays an annual dividend of $1.00 per share and has a dividend yield of 1.7%. OTC Markets Group pays out 33.0% 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. OTC Markets Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for OTC Markets Group and LPL Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OTC Markets Group 0 0 0 0 N/A
LPL Financial 0 4 7 0 2.64

LPL Financial has a consensus target price of $79.60, indicating a potential upside of 34.89%. Given LPL Financial’s higher probable upside, analysts clearly believe LPL Financial is more favorable than OTC Markets Group.

Profitability

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

Net Margins Return on Equity Return on Assets
OTC Markets Group 26.16% N/A N/A
LPL Financial 7.09% 35.98% 6.72%

Valuation & Earnings

This table compares OTC Markets Group and LPL Financial’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OTC Markets Group $52.18 million 6.69 $12.56 million $1.82 16.62
LPL Financial $4.28 billion 1.21 $238.86 million $3.00 19.67

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

Volatility & Risk

OTC Markets Group has a beta of 0.09, indicating that its share price is 91% less volatile than the S&P 500. Comparatively, LPL Financial has a beta of 1.7, indicating that its share price is 70% more volatile than the S&P 500.

Summary

LPL Financial beats OTC Markets Group on 11 of the 15 factors compared between the two stocks.

OTC Markets Group Company Profile

OTC Markets Group Inc. engages in the financial market business in the United States. It offers OTC Link Alternative Trading System, which connects a network of brokers-dealers providing liquidity and execution services for various securities. The company also provides investors, traders, institutions, and regulators with a suite of enterprise and user level market data licenses through direct or extranet connectivity, third party market data redistributors, or order management systems. In addition, it offers OTC Disclosure & News Service for posting financial reports, disclosure documents, and news releases; Real-Time Level 2 Quote Display, a service that companies sponsor to provide their investors with access to real-time level 2 quotes available on otcmarkets.com; and Blue Sky Monitoring Service for analysis, review, and guidance about a company's compliance with the United States securities laws. The company was formerly known as Pink OTC Markets Inc. and changed its name to OTC Markets Group Inc. in January 2011. OTC Markets Group Inc. was founded in 1904 and is headquartered in New York, New York.

LPL Financial Company Profile

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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