Principal Financial Group Inc Valuation – January 2019 $PFG

Company Profile (excerpt from Reuters): Principal Financial Group, Inc., incorporated on April 18, 2001, is an investment management company. The Company offers a range of financial products and services, including retirement, asset management and insurance. The Company’s segments include Retirement and Income Solutions; Principal Global Investors, Principal International; U.S. Insurance Solutions, and Corporate. The Company focuses on small and medium-sized businesses, providing a range of retirement and employee benefit solutions, and individual insurance solutions to meet the needs of the business owners and their employees. The Company offers services to businesses, individuals and institutional clients.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,822,074,184 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 212.01% Pass
5. Moderate PEmg Ratio PEmg < 20 7.92 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.11 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.72
MG Growth Estimate 14.56%
MG Value $215.28
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $82.98
MG Value based on 0% Growth $48.64
Market Implied Growth Rate -0.29%
Current Price $45.30
% of Intrinsic Value 21.04%

Principal Financial Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2014 to an estimated $5.72 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.29% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading below its Graham Number of $76.24. The company pays a dividend of $1.87 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.92, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Principal Financial Group Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $76.24
PEmg 7.92
PB Ratio 1.11
Dividend Yield 4.13%
TTM Dividend $1.87
Number of Consecutive Years of Dividend Growth 9

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $3,245,500,000
Total Assets $258,758,300,000
Intangible Assets $2,482,600,000
Total Liabilities $246,989,600,000
Shares Outstanding (Diluted Average) 287,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.81
Dec2017 $7.88
Dec2016 $4.50
Dec2015 $4.06
Dec2014 $3.65
Dec2013 $2.95
Dec2012 $2.58
Dec2011 $1.91
Dec2010 $1.95
Dec2009 $1.97
Dec2008 $1.63
Dec2007 $3.09
Dec2006 $3.74
Dec2005 $3.11
Dec2004 $2.62
Dec2003 $2.28
Dec2002 $0.41
Dec2001 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.72
Dec2017 $5.32
Dec2016 $3.88
Dec2015 $3.39
Dec2014 $2.90
Dec2013 $2.44
Dec2012 $2.13
Dec2011 $1.97
Dec2010 $2.16
Dec2009 $2.42
Dec2008 $2.70
Dec2007 $3.15
Dec2006 $2.93
Dec2005 $2.31
Dec2004 $1.70
Dec2003 $1.07
Dec2002 $0.40

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
Best Stocks Below Their Graham Number – June 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018

Other ModernGraham posts about related companies

Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC
Kemper Corp Valuation – August 2018 $KMPR
CNO Financial Group Inc Valuation – August 2018 $CNO
Sun Life Financial Inc Valuation – August 2018 $TSE-SLF
American Financial Group Inc Valuation – August 2018 $AFG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Principal Financial Group Inc Valuation – March 2018 $PFG

Company Profile (obtained from Marketwatch): The Principal Financial Group, Inc. is a global financial company, which offers businesses, individuals and institutional clients financial products and services. It specializes in retirement solutions, insurance, and investment products through the company’s diverse family of financial services companies and national network of financial professionals. It operates its business through following segments: Retirement and Income Solutions, Principal Global Investors, Principal International, U.S. Insurance Solutions and Corporate. The Retirement and Income Solutions segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Principal Global Investors segment provides asset management services to asset accumulation business, insurance operations, corporate segment and third party clients and also refers to mutual fund business. The Principal International segment relates tor the operations in Latin America including Brazil, Chile, and Mexico, and Asia which comprised of China, Hong Kong, India and Southeast Asia. The U.S. Insurance Solutions segment provides specialty benefits insurance, which consists of group dental and vision insurance, individual and group disability insurance, group life insurance and non-medical fee-for-service claims administration, and individual life insurance throughout the United States. The Corporate segment manages the assets representing capital that has not been allocated to any other segment. The company was founded by Edward A. Temple in 1879 and is headquartered in Des Moines, IA.

PFG Chart

PFG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,776,233,579 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 206.69% Pass
5. Moderate PEmg Ratio PEmg < 20 10.92 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.41 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.62
MG Growth Estimate 14.03%
MG Value $205.39
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $81.48
MG Value based on 0% Growth $47.76
Market Implied Growth Rate 1.21%
Current Price $61.37
% of Intrinsic Value 29.88%

Principal Financial Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2014 to an estimated $5.62 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading below its Graham Number of $74.18. The company pays a dividend of $1.87 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.92, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Principal Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $74.18
PEmg 10.92
PB Ratio 1.41
Dividend Yield 3.05%
TTM Dividend $1.87
Number of Consecutive Years of Dividend Growth 9

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $3,178,400,000
Total Assets $253,941,200,000
Intangible Assets $2,383,500,000
Total Liabilities $241,091,900,000
Shares Outstanding (Diluted Average) 294,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2017 $7.88
Dec2016 $4.50
Dec2015 $4.06
Dec2014 $3.65
Dec2013 $2.95
Dec2012 $2.58
Dec2011 $1.91
Dec2010 $1.95
Dec2009 $1.97
Dec2008 $1.63
Dec2007 $3.09
Dec2006 $3.74
Dec2005 $3.11
Dec2004 $2.62
Dec2003 $2.28
Dec2002 $0.41
Dec2001 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.62
Dec2017 $5.32
Dec2016 $3.88
Dec2015 $3.39
Dec2014 $2.90
Dec2013 $2.44
Dec2012 $2.13
Dec2011 $1.97
Dec2010 $2.16
Dec2009 $2.42
Dec2008 $2.70
Dec2007 $3.15
Dec2006 $2.93
Dec2005 $2.31
Dec2004 $1.70
Dec2003 $1.07
Dec2002 $0.40

Recommended Reading:

Other ModernGraham posts about the company

Principal Financial Group Inc Valuation – August 2016 $PFG
10 Undervalued Stocks for the Defensive Investor – August 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
10 Most Undervalued Companies for the Defensive Investor – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016

Other ModernGraham posts about related companies

Progressive Corp Valuation – February 2018 $PGR
Cincinnati Financial Corp Valuation – February 2018 $CINF
Lincoln National Corp Valuation – February 2018 $LNC
Aon PLC Valuation – February 2018 $AON
Travelers Companies Inc Valuation – February 2018 $TRV
Hanover Insurance Group Valuation – Initial Coverage $THG
Prudential Financial Inc Valuation – July 2017 $PRU
Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Principal Financial Group Inc Valuation – August 2016 $PFG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Principal Financial Group Inc (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. is an investment management company. The Company offers a range of financial products and services, including retirement, asset management and insurance services. The Company’s segments include Retirement and Income Solutions; Principal Global Investors, Principal International, and U.S. Insurance Solutions. It offers retirement and employee benefit solutions, and individual insurance solutions. It offers portfolio of products and services for retirement savings and retirement income. Its Principal Global Investors segment manages assets for investors around the world, using a multi-boutique strategy that provides diverse investment capabilities, including equity, fixed income, real estate and other alternative investments. It offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The U.S. Insurance Solutions segment provides group and individual insurance solutions.

PFG Chart

PFG data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,208,961,402 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 44.99% Pass
5. Moderate PEmg Ratio PEmg < 20 16.15 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.37 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PFG value chart August 2016

EPSmg $3.04
MG Growth Estimate 6.41%
MG Value $64.85
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $44.10
MG Value based on 0% Growth $25.85
Market Implied Growth Rate 3.83%
Current Price $49.13
% of Intrinsic Value 75.76%

Principal Financial Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.13 in 2012 to an estimated $3.04 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 3.83% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading above its Graham Number of $40.4. The company pays a dividend of $1.53 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.15, which was below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Principal Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

PFG charts August 2016

Graham Number $40.40
PEmg 16.15
PB Ratio 1.37
Dividend Yield 3.11%
TTM Dividend $1.53
Number of Consecutive Years of Dividend Growth 8

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $3,270,200,000
Total Assets $223,074,200,000
Intangible Assets $2,395,700,000
Total Liabilities $212,574,500,000
Shares Outstanding (Diluted Average) 292,600,000

Earnings Per Share History

Next Fiscal Year Estimate $1.99
Dec2015 $4.06
Dec2014 $3.65
Dec2013 $2.95
Dec2012 $2.58
Dec2011 $1.91
Dec2010 $1.95
Dec2009 $1.97
Dec2008 $1.63
Dec2007 $3.09
Dec2006 $3.74
Dec2005 $3.11
Dec2004 $2.62
Dec2003 $2.28
Dec2002 $0.41
Dec2001 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.04
Dec2015 $3.39
Dec2014 $2.90
Dec2013 $2.44
Dec2012 $2.13
Dec2011 $1.97
Dec2010 $2.16
Dec2009 $2.42
Dec2008 $2.70
Dec2007 $3.15
Dec2006 $2.93
Dec2005 $2.31
Dec2004 $1.70
Dec2003 $1.07
Dec2002 $0.40
Dec2001 $0.33

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Defensive Investor – August 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
10 Most Undervalued Companies for the Defensive Investor – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
10 Low PE Stocks for the Defensive Investor – June 2016

Other ModernGraham posts about related companies

Assurant Inc Valuation – August 2016 $AIZ
American International Group Inc Valuation – August 2016 $AIG
Humana Inc Valuation – August 2016 $HUM
Chubb Limited Valuation – August 2016 $CB
Torchmark Corporation Valuation – August 2016 $TMK
Anthem Inc Valuation – August 2016 $ANTM
American Financial Group Inc Valuation – August 2016 $AFG
AFLAC Inc Valuation – August 2016 $AFL
Hartford Financial Services Group Inc Valuation – August 2016 $HIG
MetLife Inc Valuation – August 2016 $MET

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Principal Financial Group Inc Valuation – March 2016 $PFG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Principal Financial Group Inc (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. is an investment management company. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its financial services companies. Its segments include Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions. Its Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Principal Global Investors segment provides asset management services.. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The U.S. Insurance Solutions segment offers individual and group insurance solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,310,854,284 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.08% Pass
5. Moderate PEmg Ratio PEmg < 20 11.09 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PFG value chart March 2016

EPSmg $3.73
MG Growth Estimate 11.29%
MG Value $116.09
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $54.15
MG Value based on 0% Growth $31.74
Market Implied Growth Rate 1.30%
Current Price $41.43
% of Intrinsic Value 35.69%

Principal Financial Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2012 to an estimated $3.73 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Principal Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

PFG charts March 2016

Graham Number $54.10
PEmg 11.09
PB Ratio 1.33
Dividend Yield 3.62%
Number of Consecutive Years of Dividend Growth 8

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Long-Term Debt $3,290,800,000
Total Assets $218,685,900,000
Intangible Assets $2,368,200,000
Total Liabilities $209,374,300,000
Shares Outstanding (Diluted Average) 298,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.07
Dec2015 $4.06
Dec2014 $3.65
Dec2013 $2.95
Dec2012 $2.58
Dec2011 $1.91
Dec2010 $1.95
Dec2009 $1.97
Dec2008 $1.63
Dec2007 $3.09
Dec2006 $3.74
Dec2005 $3.11
Dec2004 $2.62
Dec2003 $2.28
Dec2002 $0.41
Dec2001 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.73
Dec2015 $3.39
Dec2014 $2.90
Dec2013 $2.44
Dec2012 $2.13
Dec2011 $1.97
Dec2010 $2.16
Dec2009 $2.42
Dec2008 $2.70
Dec2007 $3.15
Dec2006 $2.93
Dec2005 $2.31
Dec2004 $1.70
Dec2003 $1.07
Dec2002 $0.40
Dec2001 $0.33

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Principal Financial Group Analysis – August 2015 Update $PFG
The Best Companies of the Insurance Industry – June 2015
47 Companies in the Spotlight This Week – 5/16/15

Other ModernGraham posts about related companies

Assurant Inc Valuation – February 2016 $AIZ
American International Group Inc Stock Valuation – February 2016 $AIG
Chubb Ltd Stock Valuation – February 2016 $CB
Prudential Financial Inc Valuation – February 2016 $PRU
Anthem Inc Valuation – February 2016 $ANTM
Aflac Inc Valuation – February 2016 $AFL
MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Principal Financial Group Valuation – November 2015 Update $PFG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Principal Financial Group (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. is an investment management company. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its financial services companies. Its segments include Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions. Its Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Principal Global Investors segment provides asset management services.. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The U.S. Insurance Solutions segment offers individual and group insurance solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,892,428,599 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 27.66% Fail
5. Moderate PEmg Ratio PEmg < 20 14.77 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.57 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PFG value Chart November 2015

EPSmg $3.44
MG Growth Estimate 10.94%
MG Value $104.46
Opinion Undervalued
MG Value based on 3% Growth $49.84
MG Value based on 0% Growth $29.22
Market Implied Growth Rate 3.13%
Current Price $50.76
% of Intrinsic Value 48.59%

Principal Financial Group qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.99 in 2011 to an estimated $3.44 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.13% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PFG Charts November 2015

Graham Number $55.54
PEmg 14.77
PB Ratio 1.57
Dividend Yield 2.88%
Number of Consecutive Years of Dividend Growth 7

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $3,286,100,000
Total Assets $215,365,400,000
Intangible Assets $2,404,100,000
Total Liabilities $205,745,100,000
Shares Outstanding (Diluted Average) 298,500,000

Earnings Per Share History

Next Fiscal Year Estimate $4.20
Dec14 $3.65
Dec13 $2.95
Dec12 $2.58
Dec11 $1.95
Dec10 $1.95
Dec09 $1.97
Dec08 $1.63
Dec07 $3.09
Dec06 $3.74
Dec05 $3.11
Dec04 $2.62
Dec03 $2.28
Dec02 $0.41
Dec01 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.44
Dec14 $2.91
Dec13 $2.45
Dec12 $2.14
Dec11 $1.99
Dec10 $2.16
Dec09 $2.42
Dec08 $2.70
Dec07 $3.15
Dec06 $2.93
Dec05 $2.31
Dec04 $1.70
Dec03 $1.07
Dec02 $0.40
Dec01 $0.33

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Principal Financial Group Analysis – August 2015 Update $PFG
The Best Companies of the Insurance Industry – June 2015
47 Companies in the Spotlight This Week – 5/16/15

Other ModernGraham posts about related companies

Assurant Inc. Valuation – November 2015 Update $AIZ
American International Group Inc. Valuation – November 2015 Update $AIG
Cincinnati Financial Corp Valuation – November 2015 Update $CINF
American Financial Group Inc. Valuation – November 2015 Update $AFG
Loews Corporation Valuation – November 2015 Update $L
Allstate Corporation Valuation – October 2015 Update $ALL
Humana Inc. Valuation – October 2015 Update $HUM
Torchmark Corporation Valuation – October 2015 Update $TMK
MetLife Inc. Valuation – October 2015 Update $MET
Aetna Inc. Valuation – October 2015 Update $AET

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Principal Financial Group Analysis – August 2015 Update $PFG

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Principal Financial Group (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. is an investment management company. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its financial services companies. Its segments include Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions. Its Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Principal Global Investors segment provides asset management services.. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The U.S. Insurance Solutions segment offers individual and group insurance solutions.
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Downloadable PDF version of this valuation:

ModernGraham Valuation of PFG – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Fail
5. Moderate PEmg Ratio PEmg < 20 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg 3.48
MG Growth Estimate 11.30%
MG Value $108.33
Opinion Undervalued
MG Value based on 3% Growth $50.52
MG Value based on 0% Growth $29.61
Market Implied Growth Rate 3.79%
Current Price $56.04
% of Intrinsic Value 51.73%

Principal Financial Group qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.99 in 2011 to an estimated $3.48 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.79% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PFG charts August 2015

 

PEmg 16.08
PB Ratio 1.72
Dividend Yield 2.53%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $3,315,900,000
Total Assets $222,270,700,000
Intangible Assets $2,239,500,000
Total Liabilities $212,577,300,000
Shares Outstanding (Diluted Average) 298,400,000

Earnings Per Share History

Next Fiscal Year Estimate $4.34
Dec14 $3.65
Dec13 $2.95
Dec12 $2.58
Dec11 $1.95
Dec10 $1.95
Dec09 $1.97
Dec08 $1.63
Dec07 $3.09
Dec06 $3.74
Dec05 $3.11
Dec04 $2.62
Dec03 $2.28
Dec02 $0.41
Dec01 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.48
Dec14 $2.91
Dec13 $2.45
Dec12 $2.14
Dec11 $1.99
Dec10 $2.16
Dec09 $2.42
Dec08 $2.70
Dec07 $3.15
Dec06 $2.93
Dec05 $2.31
Dec04 $1.70

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Principal Financial Group Inc. Quarterly Valuation – May 2015 $PFG

Principal_LogoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Principal Financial Group Inc. (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. (PFG) is a provider of retirement services, insurance solutions and asset management. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its family of financial services companies. As of December 31, 2013, the Company had approximately 19.4 million customers. PFG primarily focuses on small and medium-sized businesses providing an array of retirement and employee benefit solutions to meet the needs of the business, the business owner and their employees. The Company operates in four segments: retirement and investor services, principal global investors, principal international, and United States insurance solutions. PFG’s corporate segment consists of the assets and activities that have not been allocated to any other segment.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $52.39
MG Value $107.22
MG Opinion Undervalued
Value Based on 3% Growth $50.32
Value Based on 0% Growth $29.50
Market Implied Growth Rate 3.30%
PEmg 15.10
PB Ratio 1.50

Balance Sheet – March 2015

Total Debt $2,515,000,000
Total Assets $222,495,000,000
Intangible Assets $2,272,000,000
Total Liabilities $212,072,000,000
Outstanding Shares 298,500,000

Earnings Per Share

2015 (estimate) $4.30
2014 $3.65
2013 $2.95
2012 $2.58
2011 $1.95
2010 $1.95
2009 $1.97
2008 $1.63
2007 $3.09
2006 $3.74
2005 $3.11

Earnings Per Share – ModernGraham 

2015 (estimate) $3.47
2014 $2.91
2013 $2.45
2012 $2.14
2011 $1.99
2010 $2.16

Dividend History

Conclusion

Principal Financial Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.99 in 2011 to an estimated $3.47 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.3% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group Inc. (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Principal Financial Group Inc. Quarterly Valuation – February 2015 $PFG

Principal_LogoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Principal Financial Group Inc. (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. (PFG) is a provider of retirement services, insurance solutions and asset management. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its family of financial services companies. As of December 31, 2013, the Company had approximately 19.4 million customers. PFG primarily focuses on small and medium-sized businesses providing an array of retirement and employee benefit solutions to meet the needs of the business, the business owner and their employees. The Company operates in four segments: retirement and investor services, principal global investors, principal international, and United States insurance solutions. PFG’s corporate segment consists of the assets and activities that have not been allocated to any other segment.
PFG Chart

PFG data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $51.60
MG Value $54.86
MG Opinion Fairly Valued
Value Based on 3% Growth $42.19
Value Based on 0% Growth $24.73
Market Implied Growth Rate 4.62%
PEmg 17.74
PB Ratio 1.51

Balance Sheet – December 2014

Total Debt $2,531,000,000
Total Assets $219,087,000,000
Intangible Assets $2,331,000,000
Total Liabilities $208,903,000,000
Outstanding Shares 298,700,000

Earnings Per Share

2014 $3.65
2013 $2.95
2012 $2.58
2011 $1.95
2010 $1.95
2009 $1.97
2008 $1.63
2007 $3.09
2006 $3.74
2005 $3.11
2004 $2.62

Earnings Per Share – ModernGraham 

2014 $2.91
2013 $2.45
2012 $2.14
2011 $1.99
2010 $2.16
2009 $2.42

Dividend History
PFG Dividend Chart

PFG Dividend data by YCharts

Conclusion:

Principal Financial Group Inc. is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned by the low level of earnings growth over the last ten years.  The less conservative Enterprising Investor looks at a shorter horizon and has no initial concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears fairly valued after growing its EPSmg (normalized earnings) from $2.16 in 2010 to $2.91 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.62% annual earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the market price.

Be sure to check out previous ModernGraham valuations of Principal Financial Group Inc. (PFG) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group Inc. (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Principal Financial Group Inc. (PFG) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Principal Financial Group Inc. Quarterly Valuation – October 2014 $PFG

Principal_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies to Research for the Defensive Investor – October 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Principal Financial Group Inc. (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. (PFG) is a provider of retirement savings, investment and insurance products and services. As of December 31, 2011, the Company had approximately 18 million customers. PFG’s United States and international operations concentrate primarily on asset accumulation and asset management. PFG offers a range of individual and group life insurance, individual and group disability insurance, and group dental and vision insurance. It focuses on small and medium-sized businesses providing an array of retirement and employee benefit solutions. The Company operates in four segments: retirement and investor services, principal global investors, principal international, and United States insurance solutions. PFG’s corporate segment consists of the assets and activities that have not been allocated to any other segment. As of December 31, 2011, it owned 26 properties in Des Moines, Iowa, and in various other locations. In February 2013, it acquired AFP Cuprum S.A.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $52.23
MG Value $66.83
MG Opinion Fairly Valued
Value Based on 3% Growth $44.99
Value Based on 0% Growth $26.37
Market Implied Growth Rate 4.17%
PEmg 16.83
PB Ratio 1.51

Balance Sheet – September 2014

Total Debt $2,529,000,000
Total Assets $216,423,000,000
Intangible Assets $2,396,000,000
Total Liabilities $206,106,000,000
Outstanding Shares 298,200,000

Earnings Per Share

2014 (estimate) $4.23
2013 $2.95
2012 $2.58
2011 $1.95
2010 $1.95
2009 $1.97
2008 $1.63
2007 $3.09
2006 $3.74
2005 $3.11
2004 $2.62

Earnings Per Share – ModernGraham

2014 (estimate) $3.10
2013 $2.45
2012 $2.14
2011 $1.99
2010 $2.16
2009 $2.42

Dividend History

Conclusion:

Principal Financial Group qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is turned off by the level of earnings growth over the last ten years, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.16 in 2010 to an estimated $3.10 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.17% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Principal Financial Group (PFG) for better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Principal Financial Group (PFG) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Principal Financial Group Inc. Quarterly Valuation – July 2014 $PFG

Principal_LogoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Principal Financial Group (PFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Principal Financial Group, Inc. (PFG) is a provider of retirement savings, investment and insurance products and services. As of December 31, 2011, the Company had approximately 18 million customers. PFG’s United States and international operations concentrate primarily on asset accumulation and asset management. PFG offers a range of individual and group life insurance, individual and group disability insurance, and group dental and vision insurance. It focuses on small and medium-sized businesses providing an array of retirement and employee benefit solutions. The Company operates in four segments: retirement and investor services, principal global investors, principal international, and United States insurance solutions. PFG’s corporate segment consists of the assets and activities that have not been allocated to any other segment. As of December 31, 2011, it owned 26 properties in Des Moines, Iowa, and in various other locations. In February 2013, it acquired AFP Cuprum S.A.

PFG Chart

PFG data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $50.18
MG Value $66.67
MG Opinion Fairly Valued
Value Based on 3% Growth $45.21
Value Based on 0% Growth $26.50
Market Implied Growth Rate 3.80%
PEmg 16.09
PB Ratio 1.42

Balance Sheet – 6/30/2014

Total Debt $2,529,400,000
Total Assets $218,322,300,000
Intangible Assets $2,503,800,000
Total Liabilities $207,920,500,000
Outstanding Shares 293,800,000

Earnings Per Share

2014 (estimate) $4.18
2013 $2.95
2012 $2.57
2011 $2.15
2010 $2.06
2009 $1.97
2008 $1.63
2007 $3.01
2006 $3.63
2005 $3.02
2004 $2.64

Earnings Per Share – ModernGraham 

2014 (estimate) $3.12
2013 $2.50
2012 $2.21
2011 $2.08
2010 $2.18
2009 $2.38

Dividend History

PFG Dividend Chart

PFG Dividend data by YCharts

Conclusion:

Principal Financial Group is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor as it has shown insufficient growth in earnings over the last ten years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Aflac Inc. (AFL).  From a valuation side of things, the company appears fairly valued after growing its EPSmg (normalized earnings) from $2.18 in 2010 to an estimated $3.12 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.80% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Principal Financial Group (PFG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Principal Financial Group (PFG) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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