U.S. markets closed
  • S&P 500

    3,390.68
    -10.29 (-0.30%)
     
  • Dow 30

    27,463.19
    -222.19 (-0.80%)
     
  • Nasdaq

    11,431.35
    +72.41 (+0.64%)
     
  • Russell 2000

    1,590.71
    -14.50 (-0.90%)
     
  • Crude Oil

    38.93
    +0.37 (+0.96%)
     
  • Gold

    1,910.00
    +4.30 (+0.23%)
     
  • Silver

    24.47
    +0.05 (+0.18%)
     
  • EUR/USD

    1.1795
    -0.0018 (-0.15%)
     
  • 10-Yr Bond

    0.7780
    -0.0230 (-2.87%)
     
  • GBP/USD

    1.3040
    +0.0019 (+0.15%)
     
  • USD/JPY

    104.4330
    -0.4020 (-0.38%)
     
  • BTC-USD

    13,636.64
    +529.40 (+4.04%)
     
  • CMC Crypto 200

    269.98
    +8.69 (+3.33%)
     
  • FTSE 100

    5,728.99
    -63.02 (-1.09%)
     
  • Nikkei 225

    23,485.80
    -8.54 (-0.04%)
     

Principal Financial Group (NASDAQ:PFG) Share Prices Have Dropped 29% In The Last Three Years

Simply Wall St
·4 mins read

It is doubtless a positive to see that the Principal Financial Group, Inc. (NASDAQ:PFG) share price has gained some 42% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 29% in the last three years, significantly under-performing the market.

See our latest analysis for Principal Financial Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate three years of share price decline, Principal Financial Group actually saw its earnings per share (EPS) improve by 0.9% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It looks to us like the market was probably too optimistic around growth three years ago. But it's possible a look at other metrics will be enlightening.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Principal Financial Group has actually grown its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Principal Financial Group stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Principal Financial Group the TSR over the last 3 years was -20%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Principal Financial Group shareholders are down 11% for the year (even including dividends), but the market itself is up 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Principal Financial Group , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.