LPLA

LPL is a high-quality, recurring-revenue brokerage/custody platform whose top line is compounding rapidly: FY2025 revenue rose 37% to $17.0B, led by advisory revenue up 49% to $8.16B and total advisory assets up 46% to $1.39T — a mix driven by the Commonwealth acquisition plus strong organic net new advisory assets of $317.4B (vs. $137.8B in 2024). Asset-based ($3.0B, +20%) and trailing commission revenue are sticky, recurring streams that make the franchise structurally attractive. The four-year revenue history ($7.7B in 2021 to $17.0B in 2025) shows consistent, accelerating growth.

The problem is that profitability is moving the wrong way while the deal is digested. Total expense grew 44% — faster than revenue — with occupancy and equipment up 105%, professional services up 133%, amortization of other intangibles up 75%, and interest expense on borrowings up 47% as long-term debt climbed 32% to $7.26B. The result: pre-tax income fell 17% and net income dropped 18.5% to $863M, diluted EPS fell 22.2% to $10.92, and net margin compressed to just 5.1%. Operating cash flow swung to -$411M, an unusual negative that warrants scrutiny even allowing for broker working-capital and client-cash timing. Equity jumped 82% to $5.34B (acquisition-related), and liabilities/equity sits at 2.46x.