By Paul R. La Monica

It's a good time to be in the stockbrokerage business. Goldman Sachs is up more than 30% this year and is one of the top stocks in the Dow Jones Industrial Average. Morgan Stanley, the owner of E-Trade, is trading near a record high. Charles Schwab has surged too. But another smaller brokerage firm, LPL Financial, has lagged behind its Wall Street rivals. That may be about to change.

Morningstar analyst Sean Dunlop wrote in a report Thursday that LPL, whose stock is up just 2% this year, is "one of the most undervalued stocks we cover in the otherwise pricey financial-services sector." LPL now trades for only about 14.5 times 2026 earnings estimates, a discount to its five-year average forward price-to-earnings ratio of around 19.

LPL is also trading at a slight discount to Morgan Stanley and Schwab, which are valued around 16 to 17 times earnings estimates for next year. The stock has a small premium to Goldman though, which has a multiple of just under 14 times 2026 profit forecasts. But all four stocks are much cheaper than two other trading firms that Morningstar follows: Interactive Brokers and Tradeweb are both valued at nearly 30 times 2026 earnings estimates.

But Dunlop thinks that LPL, which has built its network of advisors through a series of acquisitions, including this year's $2.7 billion deal for Commonwealth, has a leg up on rivals.

The company has lost some of those advisors to competitors since the Commonwealth deal closed, but Dunlop argues that LPL still "has led the industry in advisor recruiting over each of the past eight years." As such, Morningstar expects it to post nearly 12% annual growth in client assets over the next decade.

Morningstar has a $504 fair value target price for LPL, which is more than 50% above its current prices. That's the highest target for the stock. Still, other analysts are bullish on LPL as well. The consensus target is $411.50, up almost 25% from current levels. Thirteen of the analysts who cover LPL recommend it as a buy and just five have it rated a hold.

Like other wealth managers, the company's success depends in part on the direction of the economy and markets. But as investors bet on more interest rate cuts from the Federal Reserve, the bull market could keep raging for some time. That would be good news for all the brokerage firms, but LPL could outperform its competitors given that it has been a laggard this year.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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October 17, 2025 11:55 ET (15:55 GMT)

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