Financial Analysis: Prudential Financial (PRU) versus Principal Financial Group (PFG)

Prudential Financial (NYSE: PRU) and Principal Financial Group (NYSE:PFG) are both large-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, analyst recommendations, institutional ownership and earnings.

Insider and Institutional Ownership

64.5% of Prudential Financial shares are held by institutional investors. Comparatively, 68.2% of Principal Financial Group shares are held by institutional investors. 0.7% of Prudential Financial shares are held by company insiders. Comparatively, 1.5% of Principal Financial Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Prudential Financial has a beta of 1.49, suggesting that its stock price is 49% more volatile than the S&P 500. Comparatively, Principal Financial Group has a beta of 1.66, suggesting that its stock price is 66% more volatile than the S&P 500.

Profitability

This table compares Prudential Financial and Principal Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Prudential Financial 7.15% 8.98% 0.56%
Principal Financial Group 10.15% 13.57% 0.63%

Valuation and Earnings

This table compares Prudential Financial and Principal Financial Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Prudential Financial $59.25 billion 0.73 $7.12 billion $8.92 11.32
Principal Financial Group $12.56 billion 1.42 $1.88 billion $4.40 14.06

Prudential Financial has higher revenue and earnings than Principal Financial Group. Prudential Financial is trading at a lower price-to-earnings ratio than Principal Financial Group, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for Prudential Financial and Principal Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Prudential Financial 0 7 6 0 2.46
Principal Financial Group 3 4 2 0 1.89

Prudential Financial presently has a consensus target price of $111.55, suggesting a potential upside of 10.52%. Principal Financial Group has a consensus target price of $60.13, suggesting a potential downside of 2.84%. Given Prudential Financial’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Prudential Financial is more favorable than Principal Financial Group.

Dividends

Prudential Financial pays an annual dividend of $3.00 per share and has a dividend yield of 3.0%. Principal Financial Group pays an annual dividend of $1.88 per share and has a dividend yield of 3.0%. Prudential Financial pays out 33.6% of its earnings in the form of a dividend. Principal Financial Group pays out 42.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Prudential Financial has increased its dividend for 5 consecutive years and Principal Financial Group has increased its dividend for 8 consecutive years. Principal Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Principal Financial Group beats Prudential Financial on 10 of the 17 factors compared between the two stocks.

Prudential Financial Company Profile

Prudential Financial, Inc., is a financial services company. The Company, through its subsidiaries, offers a range of financial products and services, which includes life insurance, annuities, retirement-related services, mutual funds and investment management. The Company’s operations consists of four divisions, which together encompass seven segments. The U.S. Retirement Solutions and Investment Management division consists of Individual Annuities, Retirement and Asset Management segments. The U.S. Individual Life and Group Insurance division consists of Individual Life and Group Insurance segments. The International Insurance division consists of International Insurance segment. The Closed Block division consists of Closed Block segment. The Company has operations in the United States, Asia, Europe and Latin America.

Principal Financial Group Company Profile

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. Its segments include Retirement and Income Solutions; Principal Global Investors, Principal International; U.S. Insurance Solutions, and Corporate. The Company offers a portfolio of products and services for retirement savings and retirement income. The Company’s Principal Global Investors segment manages assets for investors around the world. The Company offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The Company’s U.S. Insurance Solutions segment provides group and individual insurance solutions. It 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.

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