Analyst Note| Michael Wong, CFA, CPA |
We are increasing our fair value estimate for narrow-moat LPL Financial to $256 from $221 per share. Our fair value estimate correlates to a price/forward earnings multiple of 14.5 times and an enterprise value/EBITDA multiple of 10 times. Of the net $35 increase in our fair value estimate, $22 is from increasing cash-related revenue, primarily from the company's plan to move excess client cash that is currently in money market funds into higher revenue-yielding client cash accounts. Of the remaining $13 increase, $9 is from other revenue adjustments and $4 is from increasing operating margins.