Principal Financial Group (PFG)


Key Statistics

Enterprise Value = $13.1 billion

Operating Income = $1.725 billion

EV/Operating Income = 7.59x

Earnings Yield = 9%

Price/Revenue = .95x

Debt/Equity = 28%

Price/Book = 1.02x

The Company

Principal Financial Group is an Iowa based asset manager and insurance company. Their current AUM is over $700 million. They company has grown premiums and AUM (along with fee income) rapidly over the last decade, with revenue rising from $8 billion in 2009 to $14 billion today.

The company is global in scope and operates all over the world. The business is split up into four segments: (1) Retirement & income solutions, (2) Principal Global Investors, (3) Principal International, and (4) US Insurance (life insurance is a key focus).

The valuation is likely depressed over concerns about fee income, along with the general gloom around the financial industry as the market expects interest rates to decline and there are jitters about a recession which I wrote about here.

My Take

PFG currently has a dividend yield of 4.1% and the share count has declined by 2.67% in the last year.

PFG is cheap relative to its history and its peers. It currently trades slightly below sales, which is where it was around nadirs in the valuation such as when it was emerging from the financial crisis. It is also trading at book value for the first time since 2013. The 5-year average price/book ratio for the stock is 1.41 and the average price/sales ratio is 1.25.

Like the other financials that I own, my expectation is that the valuation gap will eventually close and while I wait for that to happen, I’ll earn a decent shareholder yield.

PLEASE NOTE: The information provided on this site is not financial advice and it is for informational and discussion purposes only. Do your own homework. Full disclosure: my current holdings.  Read the full disclaimer.