Rating Change #2
Principal Financial Group (PFG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and poor profit margins.
Highlights from the ratings report include:
- PRINCIPAL FINANCIAL GRP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PRINCIPAL FINANCIAL GRP INC increased its bottom line by earning $2.07 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.96 versus $2.07).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Insurance industry average. The net income increased by 87.1% when compared to the same quarter one year prior, rising from $142.30 million to $266.30 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, PRINCIPAL FINANCIAL GRP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- PFG has underperformed the S&P 500 Index, declining 6.20% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has decreased to $590.00 million or 29.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Principal Financial Group, Inc. provides retirement savings, investment, and insurance products and services worldwide. The company has a P/E ratio of 10, equal to the average financial services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Principal Financial Group has a market cap of $7.7 billion and is part of the financial sector and financial services industry. Shares are down 24.7% year to date as of the close of trading on Wednesday.You can view the full Principal Financial Group Ratings Report or get investment ideas from our investment research center.
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