Contrasting Main Street Capital (NYSE:MAIN) and LPL Financial (NASDAQ:LPLA)

Main Street Capital (NYSE:MAIN) and LPL Financial (NASDAQ:LPLA) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.

Valuation and Earnings

This table compares Main Street Capital and LPL Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Main Street Capital	$566.39 million	8.89	$493.40 million	$4.96	10.85
LPL Financial	$16.99 billion	1.49	$863.02 million	$12.54	25.59

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

Risk & Volatility

Main Street Capital has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500. Comparatively, LPL Financial has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500.

Dividends

Main Street Capital pays an annual dividend of $3.18 per share and has a dividend yield of 5.9%. LPL Financial pays an annual dividend of $1.20 per share and has a dividend yield of 0.4%. Main Street Capital pays out 64.1% of its earnings in the form of a dividend. LPL Financial pays out 9.6% 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. Main Street Capital has increased its dividend for 4 consecutive years. Main Street Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

20.3% of Main Street Capital shares are held by institutional investors. Comparatively, 95.7% of LPL Financial shares are held by institutional investors. 3.8% of Main Street Capital shares are held by insiders. Comparatively, 0.6% of LPL Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Main Street Capital and LPL Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Main Street Capital	0	6	5	0	2.45
LPL Financial	0	3	14	0	2.82

Main Street Capital currently has a consensus target price of $61.00, suggesting a potential upside of 13.34%. LPL Financial has a consensus target price of $409.69, suggesting a potential upside of 27.64%. Given LPL Financial’s stronger consensus rating and higher probable upside, analysts clearly believe LPL Financial is more favorable than Main Street Capital.

Profitability

This table compares Main Street Capital and LPL Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Main Street Capital	78.49%	11.80%	6.32%
LPL Financial	5.13%	32.20%	9.35%

Summary

LPL Financial beats Main Street Capital on 11 of the 17 factors compared between the two stocks.

About Main Street Capital

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.

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 enterprises in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans, and insurance. The company also provides fee-based 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 money market products; 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; trust, investment management oversight, and custodial services for estates and families, as well as insurance brokerage general agency services; and technology products, such as proposal generation, investment analytics, and portfolio modeling. 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 1989 and is based in San Diego, California.