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Is Principal Financial a Good Value Pick at the Moment?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Principal Financial Group, Inc. (PFG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Principal Financial Group has a trailing twelve months PE ratio of 13.76, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.92. If we focus on the long-term PE trend, Principal Financial Group’s current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.
The reason for this increase is that over the past few months, the stock’s price has charted a strong growth trajectory while the earnings have somewhat declined. Both of these trends have had an inflating effect on the PE ratio. These trends can be clearly seen in the chart below:
Further, the stock’s PE also compares favorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 16.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Principal Financial Group has a forward PE ratio (price relative to this year’s earnings) of 12.16, so it is fair to say that a slightly more value-oriented path may be ahead for Apple stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Principal Financial Group has a P/S ratio of about 1.47. This is way lower than the S&P 500 average, which comes in at 2.78 right now. Also, as we can see in the chart below, this is around the highs for this stock in particular over the past three years.
If anything, Principal Financial Group is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Principal Financial Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Principal Financial Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Principal Financial Group is just 1.44, a level that is slightly lower than the industry average of 1.58. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.11, which is far better than the industry average of 5.48.
Clearly, Principal Financial Group is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Principal Financial Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘B’. This gives PFG a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been inching lower of late. The current quarter has seen three estimates go lower compared to none higher in the past sixty days, while the full year estimate has seen two down and none higher in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has fallen by 0.8% in the past two months, while the full year estimate has inched lower by 0.4%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Principal Financial Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom37% out of more than 250 industries) and a Zacks Rank #3 (Hold), it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial-Investment Management industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Principal Financial a Good Value Pick at the Moment?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Principal Financial Group, Inc. (PFG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Principal Financial Group has a trailing twelve months PE ratio of 13.76, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.92. If we focus on the long-term PE trend, Principal Financial Group’s current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.
The reason for this increase is that over the past few months, the stock’s price has charted a strong growth trajectory while the earnings have somewhat declined. Both of these trends have had an inflating effect on the PE ratio. These trends can be clearly seen in the chart below:
Further, the stock’s PE also compares favorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 16.17. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Principal Financial Group has a forward PE ratio (price relative to this year’s earnings) of 12.16, so it is fair to say that a slightly more value-oriented path may be ahead for Apple stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Principal Financial Group has a P/S ratio of about 1.47. This is way lower than the S&P 500 average, which comes in at 2.78 right now. Also, as we can see in the chart below, this is around the highs for this stock in particular over the past three years.
If anything, Principal Financial Group is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Principal Financial Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Principal Financial Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Principal Financial Group is just 1.44, a level that is slightly lower than the industry average of 1.58. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.11, which is far better than the industry average of 5.48.
Clearly, Principal Financial Group is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Principal Financial Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘B’. This gives PFG a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been inching lower of late. The current quarter has seen three estimates go lower compared to none higher in the past sixty days, while the full year estimate has seen two down and none higher in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has fallen by 0.8% in the past two months, while the full year estimate has inched lower by 0.4%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Principal Financial Group Inc Price and Consensus
Principal Financial Group Inc Price and Consensus | Principal Financial Group Inc Quote
This somewhat negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Principal Financial Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom37% out of more than 250 industries) and a Zacks Rank #3 (Hold), it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial-Investment Management industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>