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PFG vs. BLK: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Principal Financial (PFG - Free Report) and BlackRock (BLK - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Principal Financial and BlackRock are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PFG has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

PFG currently has a forward P/E ratio of 12.40, while BLK has a forward P/E of 20.54. We also note that PFG has a PEG ratio of 2.09. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BLK currently has a PEG ratio of 3.65.

Another notable valuation metric for PFG is its P/B ratio of 1.82. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BLK has a P/B of 2.83.

These metrics, and several others, help PFG earn a Value grade of A, while BLK has been given a Value grade of D.

PFG has seen stronger estimate revision activity and sports more attractive valuation metrics than BLK, so it seems like value investors will conclude that PFG is the superior option right now.


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