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Is Principal Financial (PFG) a Great Value Stock Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Principal Financial (PFG). PFG is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 7.73, while its industry has an average P/E of 12.63. PFG's Forward P/E has been as high as 9.99 and as low as 4.10, with a median of 8.73, all within the past year.

PFG is also sporting a PEG ratio of 1.18. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PFG's PEG compares to its industry's average PEG of 1.69. Over the last 12 months, PFG's PEG has been as high as 3.49 and as low as 0.49, with a median of 1.38.

Another notable valuation metric for PFG is its P/B ratio of 0.82. 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. This company's current P/B looks solid when compared to its industry's average P/B of 1.96. Within the past 52 weeks, PFG's P/B has been as high as 1.14 and as low as 0.46, with a median of 1.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. PFG has a P/S ratio of 0.78. This compares to its industry's average P/S of 1.95.

Value investors will likely look at more than just these metrics, but the above data helps show that Principal Financial is likely undervalued currently. And when considering the strength of its earnings outlook, PFG sticks out at as one of the market's strongest value stocks.


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Zacks Investment Research