Principal Financial Group (PFG): Margin Expansion Reinforces Bullish Value Narrative

Principal Financial Group (PFG) is forecasting robust earnings growth of 15.1% per year, supported by a recent move to profitability and strong quality in past earnings. Revenue is expected to rise at a 6.5% annual rate. However, both earnings and revenue growth are projected to trail the broader US market. While earnings have declined by 10.4% per year over the past five years, PFG’s positive turn in profit margin, along with a share price of $82.20 that sits below its internally estimated fair value, is signaling potential value for investors focused on earnings quality and margin trends.

See our full analysis for Principal Financial Group.

Next, we’ll see how these results stack up against the broader market narrative to find out where views get confirmed or challenged.

See what the community is saying about Principal Financial Group

Margins Tracking Toward 11.6% in 3 Years

• Analysts estimate that Principal Financial Group's profit margins will rise from the current 7.5% to 11.6% by 2028, reflecting disciplined cost controls and a strategic focus on higher-fee mandates.
• Analysts' consensus view points to two main drivers for this margin expansion:
  • Targeted growth in global asset management and SMB retirement channels is expected to increase fee-based revenue, helping margins recover even with market volatility.
  • Ongoing cost management efforts that better align expenses with revenue have already begun to improve net margins resilience during uncertain market conditions.
• The consensus narrative highlights Principal’s diversified model and strategic expansion internationally as further positives for long-term margin improvements, despite competition and periodic volatility.
  Analysts are watching closely to see if margin gains can be sustained as global expansion efforts and fee revenue sources grow.
• The sharp improvement in margin outlook, an increase of almost 4 percentage points, is a key differentiator versus peers, whose margin recovery lagged during similar cycles.

If the consensus view holds, PFG's margin trajectory could outpace rival insurers and asset managers in comparable segments.
📊 Read the full Principal Financial Group Consensus Narrative.

Net Cash Outflows Pressure Asset Gather

• Despite strong earnings, Principal reported $4 billion in net cash outflows recently, largely resulting from low-fee institutional fixed income withdrawals.
• Analysts' consensus view flags a critical tension for bears:
  • On one hand, positive quarterly earnings are supported by diversified business lines and selective growth in high-fee areas.
  • Yet, bears argue that persistent negative flows, particularly if institutional clients continue to shift to risk-off allocations, could compress future net margins and slow asset base growth even as headline profits remain solid.

DCF Fair Value at $203 Signals Deep Discount

• Principal Financial Group's current share price of $82.20 is markedly below the estimated DCF fair value of $203.24 and also trades at a PE ratio of 11.6x, undercutting both US insurance industry average (13.5x) and peer average (11.8x).
• Analysts' consensus view contends that such valuation discounts offer opportunity but require belief in robust future performance:
  • With the analyst consensus price target at $87.67, just above today’s price, consensus sees the stock as fairly priced for now unless future margins expand above current forecasts or revenue growth surprises to the upside.
  • Investors are encouraged to examine whether their own revenue and margin expectations match the consensus projections that underpin the current target; if more optimistic, the current discount could prove compelling.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Principal Financial Group on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Principal Financial Group.

See What Else Is Out There

Despite impressive margin improvements, Principal Financial Group’s continued net cash outflows and below-market revenue growth signal that future stability is not fully assured.

If you want stocks that deliver steadier gains and less volatility, check out stable growth stocks screener (2115 results) and discover companies that consistently grow revenue and earnings through all market cycles.

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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