Principal Financial (PFG) AI Stock Analysis

• Market Cap: $16.45B
• Dividend Yield: 3.99%
• Average Volume (3M): 1.45M
• Price to Earnings (P/E): 10.9
• Beta (1Y): 1.06
• Revenue Growth: 18.02%
• EPS Growth: 171.70%
• Country: US
• Employees: 19,700
• Sector: Financial
• Sector Strength: 80
• Industry: Insurance - Diversified
• EPS (TTM): 6.68
• Shares Outstanding: 225,571,330
• 10 Day Avg. Volume: 1,193,253
• 30 Day Avg. Volume: 1,451,374
• PEG Ratio: 0.06
• Price to Book (P/B): N/A
• Price to Sales (P/S): 1.16
• Price to Cash Flow (P/CF): 3.20
• P/FCF Ratio: 3.20
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $86.20
• Price Target Upside: 18.18% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 11

Principal Financial's score of 66 reflects strong profitability improvements and strategic successes in expanding its retirement ecosystem. Despite inconsistent revenue growth and cash flow challenges, the company maintains moderate leverage and a reasonable valuation with a solid dividend yield. The positive earnings call sentiment further supports the stock, although technical indicators suggest some short-term uncertainty.

Positive Factors

Business Transformation

PFG has executed on a business mix transformation and has a solid cash flow profile supported by its more capital-light mix and focus on the less competitive small and midsize market (SMB) marketplace.

Market Positioning

PFG's performance in its SMB market has exceeded industry statistics with significant growth in areas such as defined contribution assets and 401(k) plan participant growth.

Negative Factors

Fee Rate Challenges

PFG faces some secular challenges including declining fee rates in its retirement and asset management markets as well as macro sensitivities including elevated equity market sensitivity and FX impacts to earnings within its international pension operations.

Valuation Concerns

Current valuation is considered full and the price target has been lowered.

Principal Financial Business Overview & Revenue Model

Company Description

Principal Financial Group, Inc. provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide. The company operates through Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments. The Retirement and Income Solutions segment provides a portfolio of asset accumulation products and services for retirement savings and income. It offers products and services for defined contribution plans, including 401(k) and 403(b) plans, defined benefit pension plans, nonqualified executive benefit plans, employee stock ownership plans, equity compensation, and pension risk transfer services; individual retirement accounts; investment only products; and mutual funds, individual variable annuities, and bank products. The Principal Global Investors segment provides equity, fixed income, real estate, and other alternative investments, as well as asset allocation, stable value management, and other structured investment strategies. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities, and life insurance accumulation products, as well as voluntary savings plans in Brazil, Chile, Mexico, China, Hong Kong Special Administrative Region, India, and Southeast Asia. The U.S. Insurance Solutions segment provides specialty benefits, such as group dental and vision insurance, group life insurance, and group and individual disability insurance, as well as administers group dental, disability, and vision benefits; and individual life insurance products comprising universal, variable universal, indexed universal, and term life insurance products in the United States. It also offers insurance solutions for small and medium-sized businesses and their owners, as well as executives. Principal Financial Group, Inc. was founded in 1879 and is based in Des Moines, Iowa.

How the Company Makes Money

Principal Financial Group generates revenue through several key streams. Primarily, the company earns money from managing retirement and investment products, including mutual funds and annuities, where they charge management fees based on the assets under management (AUM). Additionally, PFG receives premiums from its insurance products, which include life and disability insurance. The company also earns fees from its asset management services provided to institutional clients. Significant partnerships with financial advisors and other financial institutions enhance the distribution and reach of Principal's products and services, contributing to its earnings. The company's diversified approach across different financial sectors helps in mitigating risks and capitalizing on various market opportunities.

Principal Financial Financial Statement Overview

Summary

Principal Financial demonstrates strong profitability improvements with enhanced margins and return on equity. However, inconsistent revenue growth and cash flow challenges, particularly the recent negative free cash flow, pose risks. The balance sheet reflects moderate leverage, which is manageable but needs monitoring given the asset-intensive nature of the industry.

Income Statement

Principal Financial has shown significant improvement in profitability over the years with a notable increase in EBIT and Net Income. The net profit margin improved from 4.56% in 2021 to 9.74% in 2024, reflecting better cost management. However, revenue growth has been inconsistent, with a decline in 2024 after a peak in 2022. The EBIT margin has strengthened, showing operational efficiency improvements.

Balance Sheet

The company maintains a stable equity base, with a debt-to-equity ratio of 0.37 in 2024, indicating moderate leverage. The equity ratio remains relatively low at 3.53%, reflecting the asset-heavy nature of the industry. Return on equity has improved to 14.17% in 2024, showcasing effective use of shareholders' funds despite the low equity ratio.

Cash Flow

Cash flow performance is mixed, with negative free cash flow in 2024 due to a significant drop in operating cash flow. The operating cash flow to net income ratio has been volatile, currently negative, indicating challenges in converting net income into cash. The free cash flow to net income ratio also turned negative, highlighting potential liquidity concerns.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
16.13B	13.67B	17.49B	14.26B	14.74B
	Gross Profit
16.13B	13.67B	17.49B	14.26B	14.74B
	EBIT
0.00	8.59B	6.02B	2.04B	1.66B
	EBITDA
0.00	0.00	6.28B	0.00	0.00
	Net Income Common Stockholders
1.57B	623.20M	4.76B	1.58B	1.40B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
29.94B	27.19B	67.74B	80.49B	81.56B
	Total Assets
313.66B	305.05B	303.00B	321.21B	313.47B
	Total Debt
4.11B	3.99B	4.08B	4.36B	4.36B
	Net Debt
-103.90M	-715.70M	-770.30M	2.03B	1.51B
	Total Liabilities
302.19B	293.84B	292.70B	304.70B	296.60B
	Stockholders Equity
11.09B	10.92B	10.00B	16.13B	16.56B
Cash Flow		Free Cash Flow
4.53B	3.69B	3.06B	3.09B	3.63B
	Operating Cash Flow
4.60B	3.79B	3.17B	3.22B	3.74B
	Investing Cash Flow
-5.40B	-1.35B	1.06B	-5.66B	-5.03B
	Financing Cash Flow
300.30M	-2.59B	-1.72B	1.92B	1.62B

Principal Financial Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 72.94
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFG, the sentiment is Negative. The current price of 72.94 is below the 20-day moving average (MA) of 83.10, below the 50-day MA of 83.56, and below the 200-day MA of 81.30, indicating a bearish trend. The MACD of 0.22 indicates Positive momentum. The RSI at 51.18 is Neutral, neither overbought nor oversold. The STOCH value of 38.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PFG.

Principal Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACGL	79 Outperform	$33.00B	7.85	22.02%	―	26.24%	-3.87%
HIG	79 Outperform	$32.41B	10.97	19.58%	1.74%	8.19%	29.77%
AIG	70 Outperform	$46.84B	15.59	7.10%	2.03%	-28.56%	1.14%
AEG	68 Neutral	$9.05B	12.67	9.36%	5.16%	-5.03%	―
PFG	66 Neutral	$16.45B	10.92	14.28%	3.99%	18.02%	171.70%
Sector *	63 Neutral	$12.86B	9.19	9.16%	4.78%	16.31%	-8.97%
EQH	56 Neutral	$13.84B	11.94	61.74%	2.13%	16.81%	14.00%

Principal Financial Corporate Events

Principal Financial Reports $712.1 Billion in AUM

As of December 31, 2024, Principal Financial Group reported assets under management totaling $712.1 billion, with significant portions managed domestically and internationally. The quarter saw a (3.7)% impact on AUM due to foreign currency translation and market performance, highlighting the importance of their diverse allocation strategy during market dislocations.