Is Principal Financial Group (PFG) Price Around US$91 Reflecting A Fair Long Term Outlook

• Wondering if Principal Financial Group at around US$91 a share offers good value or is getting ahead of itself? This article breaks down what the current price may be implying.
• The stock has returned 1.1% over the last 7 days, 1.8% year to date, and 36.0% over the past year, with a 1.3% decline across the last 30 days. This may hint that expectations and risk perceptions are still shifting.
• Recent coverage has focused on how investors are reassessing established insurers and paying closer attention to balance sheet resilience and the consistency of capital return policies. For Principal Financial Group, this context helps explain why the share price has moved over different time frames as the market weighs quality against price.
• Right now, Principal Financial Group has a valuation score of 2/6, which suggests that some standard checks flag potential value while others are more cautious. The sections ahead will compare common valuation approaches before finishing with a way to think about valuation that brings these methods together more clearly.

Principal Financial Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Principal Financial Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company can earn above the return that shareholders are asking for, then turns that into an estimate of what the stock could be worth today.

For Principal Financial Group, the model starts with a Book Value of $54.67 per share and a Stable EPS of $10.61 per share, based on weighted future Return on Equity estimates from 4 analysts. The Average Return on Equity is 16.85%, while the Cost of Equity is $4.40 per share. That leaves an Excess Return of $6.22 per share, which is what the model treats as value created above shareholders’ required return.

The analysis also uses a Stable Book Value of $63.01 per share, sourced from weighted future Book Value estimates from 7 analysts. Combining these inputs produces an intrinsic value estimate of about $237.28 per share. Compared with a share price around $91, the Excess Returns model implies the stock is 61.6% undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests Principal Financial Group is undervalued by 61.6%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Principal Financial Group.

Approach 2: Principal Financial Group Price vs Earnings

For a profitable company like Principal Financial Group, the P/E ratio is a useful way to link what you pay per share with the earnings that support that price. It captures how much the market is currently willing to pay for each dollar of earnings.

What counts as a "normal" or "fair" P/E depends on how the market views growth prospects and risk. Higher expected growth or lower perceived risk can justify higher P/E levels, while slower expected growth or higher risk often aligns with lower P/E ratios.

Principal Financial Group currently trades on a P/E of 16.63x. That sits above the Insurance industry average of 11.40x and also above a peer average of 12.68x. Simply Wall St’s Fair Ratio for Principal Financial Group is 14.80x, which is an estimate of what the P/E might be given factors such as earnings growth profile, industry, profit margins, market cap and company specific risks.

The Fair Ratio is more tailored than a simple comparison with peers or the industry, because it adjusts for these company specific characteristics rather than assuming all insurers deserve the same multiple. Compared with the current 16.63x P/E, the 14.80x Fair Ratio suggests the shares are trading at a premium to that tailored benchmark.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Principal Financial Group Narrative

Earlier it was mentioned that there is an even better way to think about valuation, and on Simply Wall St that comes through Narratives, where you choose the story you believe about Principal Financial Group, link it to explicit forecasts for revenue, earnings, margins and P/E, and let the platform convert that into a Fair Value that you can compare to today’s price.

Each Narrative is a clear storyline behind the numbers, stored on the Community page that is used by millions of investors. This means you can see how a more optimistic view, such as a Fair Value around US$106.0 with assumed revenue of US$19.5b, earnings of US$2.6b and a 9.7x P/E in 2029, contrasts with a more cautious view closer to US$83.0 that uses lower earnings and an 8.2x P/E.

Because Narratives update as new news, earnings and analyst inputs flow through, you can quickly see when your preferred Principal Financial Group story no longer matches the consensus. This can help you decide whether a gap between Fair Value and the market price is big enough to consider buying, holding, or selling.

For Principal Financial Group however, we'll make it really easy for you with previews of two leading Principal Financial Group Narratives:

🐂 Principal Financial Group Bull Case

Fair value: US$106.00 per share

Gap to this fair value relative to today’s US$91.06 price: about 14.1% below that narrative fair value

Revenue growth assumption: 7.64% a year

• Assumes steady revenue growth supported by demand for retirement and wealth solutions, including in emerging markets, and a larger contribution from fee based, higher margin businesses.
• Builds in higher net profit margins over time, helped by digital investment, pricing in areas like Specialty Benefits, and a business mix that leans more on capital light, fee driven lines.
• Sees capital strength and share buybacks as important supports for per share earnings and for justifying a fair value that sits toward the higher end of analyst targets.

🐻 Principal Financial Group Bear Case

Fair value: US$83.00 per share

Gap to this fair value relative to today’s US$91.06 price: about 9.7% above that narrative fair value

Revenue growth assumption: 6.65% a year

• Assumes persistent market volatility and cautious client behaviour keep a lid on fee revenue growth in retirement and asset management, with pension risk transfer flows also at risk of slowing.
• Highlights the risk that rising loss costs, competition and pricing pressure in some specialty benefits lines, and tighter expense control together limit future margin expansion.
• Uses a lower P/E multiple to reflect concern that sector wide valuation pressure could cap how far Principal Financial Group trades above book and earnings even if operations remain solid.

If you want a concise way to pull this together, focus on which story you think is closer to reality, how comfortable you are with the assumptions on growth, margins and multiples, and whether the current US$91.06 share price gives you enough room for error relative to the fair values implied by these Narratives.

Do you think there's more to the story for Principal Financial Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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