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PFG or TROW: Which Is the Better Value Stock Right Now?

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Investors with an interest in Financial - Investment Management stocks have likely encountered both Principal Financial (PFG - Free Report) and T. Rowe Price (TROW - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Principal Financial and T. Rowe Price are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PFG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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 11.49, while TROW has a forward P/E of 17.07. We also note that PFG has a PEG ratio of 1.35. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TROW currently has a PEG ratio of 2.84.

Another notable valuation metric for PFG is its P/B ratio of 1.81. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TROW has a P/B of 2.75.

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

PFG sticks out from TROW in both our Zacks Rank and Style Scores models, so value investors will likely feel that PFG is the better option right now.


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T. Rowe Price Group, Inc. (TROW) - free report >>

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