LPL Financial (NASDAQ:LPLA) -- the largest independent broker-dealer in the U.S. -- has quietly posted solid returns for investors over the past few years. Last year the stock returned 14.6%, outperforming the financial sector, and this year it is up about 24% year to date, buoyed by a major acquisition and several new clients that it brought on board.

With a solid fourth quarter under its belt -- as well as some major investments and acquisitions that should spur growth down the road -- is LPL Financial a buy?

LPL is a market leader and will increase its market share

LPL is the largest independent broker-dealer in the U.S., almost twice as big as its next-largest competitor in terms of annual revenue. LPL rang up $5.9 billion in net sales last year, a 4% gain from the year before. In the fourth quarter, revenue rose 9% to $1.6 billion. Assets grew 18% year over year to $903 billion, with organic assets not from acquisitions up 8.8% year over year.

As an independent broker-dealer, LPL's financial advisors are not tied to a specific Wall Street investment firm, like Morgan Stanley, for example. As such, LPL advisors can choose to recommend a broader swath of products and services than those tied to the major wirehouses.

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LPL will grow its market share with the acquisition of competitor Waddell & Reed's wealth management business, the 10th-largest independent broker-dealer in terms of annual revenue. Macquarie Asset Management bought Waddell & Reed on Dec. 2, then turned around and sold the broker-dealer business to LPL for $300 million. Waddell & Reed will bring over about $70 billion in broker-dealer assets when the deal closes in mid-2021, adding to LPL's $903 billion. About 80% of Waddell & Reed's clients have already agreed to migrate to LPL. As part of the deal, Macquarie will become a strategic asset management partner of LPL and the two will "explore additional long-term opportunities together," LPL CEO Dan Arnold said. 

LPL also bought two smaller shops in 2020: E.K. Riley, a broker-dealer with $2 billion in assets, and Lucia Securities, an advisor with $1.5 billion in client assets.

LPL has added some major new clients and services

In late 2020, LPL brought to its platform the brokerage and advisor teams and assets of two banks. First, it signed an agreement with M&T Bank to outsource its retail brokerage and advisory business, called M&T Securities, to LPL. "LPL is able to offer superior technology at the scale and pace that will help us differentiate our services and deepen our relationships with clients," said Matt McAfee, head of M&T Affluent Wealth Markets.

Also in October, LPL signed a similar deal with BMO Harris Bank to run its retail brokerage and advisory business. BMO Harris Financial Advisors will bring about $14 billion in brokerage and advisory assets and 115 financial advisors onto LPL's platform. Both of these deals will take effect in mid-2021.

In an attempt to further expand its market, the company launched LPL Strategic Wealth Services last April, which allows advisors to work as independent contractors for LPL, using its platform while maintaining their own businesses. Arnold said the service will expand LPL's addressable market from $4 trillion to $13 trillion and contribute to organic growth in 2021.

LPL is clearly a company in growth mode as it looks to increase its market share with an aggressive acquisition strategy as well as new initiatives to spur organic growth. Is it a buy? The price-to-earnings ratio is a bit high at around 23 with a price-to-book ratio of around 8, based on a nearly 28% run-up this year, due perhaps to all the moves LPL has made.

But LPL has a consistent history of revenue increases, and these new moves, once they close and are integrated, should solidify LPL's position as a market leader. I'd probably hold off a quarter to buy, but this certainly looks like a stock to consider.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.