Principal Financial Group (PFG) Is Today's Roof Leaker Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Principal Financial Group ( PFG) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Principal Financial Group as such a stock due to the following factors:

  • PFG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.0 million.
  • PFG has traded 352,225 shares today.
  • PFG is trading at 1.67 times the normal volume for the stock at this time of day.
  • PFG crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on PFG:

Principal Financial Group, Inc. provides retirement, asset management, and insurance products and services. It operates through Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments. The stock currently has a dividend yield of 2.9%. PFG has a PE ratio of 13. Currently there are 5 analysts that rate Principal Financial Group a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for Principal Financial Group has been 1.3 million shares per day over the past 30 days. Principal Financial Group has a market cap of $15.3 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.86 and a short float of 2.3% with 5.17 days to cover. Shares are up 0.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Principal Financial Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 7.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although PFG's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • PRINCIPAL FINANCIAL GRP INC has improved earnings per share by 46.3% 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. During the past fiscal year, PRINCIPAL FINANCIAL GRP INC increased its bottom line by earning $3.66 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($4.39 versus $3.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 39.9% when compared to the same quarter one year prior, rising from $301.90 million to $422.40 million.

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