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In December 2018, Principal Financial Group, Inc. (NASDAQ:PFG) announced its latest earnings update, which revealed that the company endured a significant headwind with earnings declining by -33%. Below is a brief commentary on my key takeaways on how market analysts perceive Principal Financial Group’s earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for this coming year seems pessimistic, with earnings reducing by -3.6%. But in the following year, there is a complete contrast in performance, with arriving at double digit 2.5% compared to today’s level and continues to increase to US$1.6b in 2022.
Even though it is useful to be aware of the rate of growth each year relative to today’s value, it may be more beneficial gauging the rate at which the earnings are moving every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Principal Financial Group’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 1.6%. This means, we can expect Principal Financial Group will grow its earnings by 1.6% every year for the next few years.
For Principal Financial Group, there are three key factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is PFG worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PFG is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PFG? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.