Stock market

Is Legal & General one of the most valued shares in the FTSE 100? Here’s what the charts say.

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Legal and GeneralOf The (LSE:LGEN) share price is once again on the rise. But the financial services giant still trades well below its pre-Covid levels. It can be one of FTSE 100What are the best value stocks to buy now?

Legal & General's share price performance since 2019.
Created with TradingView.

Earnings

The first thing to consider is how legal and common shares are valued in relation to forecasted earnings. I will do this with the price-to-earnings (P/E) ratio and the price-to-earnings-growth (PEG) ratio.

Today, the company trades at a P/E ratio of 9.6 times for the current fiscal year. This is 10.5 times lower than the FTSE 100 share average.

This is less than 9.8 times the average for the self-contained peer group. Aviva, M&G, Prudential, AIG And Met Life. The individual ratios of these firms can be seen below.

Stock Forward P/E ratio
Aviva 11.3 times
M&G 9.3 times
Prudential 9.4 times
AIG 11 times
Met Life 8.4 times

Low revenue multiples are common in businesses with poor growth potential. However, this is not the category that legal and general falls into.

Citi analysts expect the firm’s revenue to grow 254% annually through 2024.

Any reading below 1 indicates that the stock is undervalued.

Assets

P/B ratio of Legal & General vs its competitors.
Created with TradingView.

As we can see, Legal and General’s price-to-book (P/B) ratio has increased since last summer. In fact, at around 3.4 times its multiple is 2 times ahead of its 10-year average.

We also see that the P/B ratio of the firm is significantly higher than that of each of its industry competitors. The sector average comes in at 1.8 times.

profit

Next, I’ll look at the dividend yield, which illustrates the income provided by L&G shares relative to its price.

The company scores very high here. Its reading of 8.5% for 2024 is higher than the 3.7% average for FTSE 100 stocks.

Additionally, its output is also much higher than any of its competitors (bar M&G). The average yield of the six companies discussed here comes back to 5.4%.

Stock Forward dividend yield
Aviva 7%
M&G 9.4%
Prudential 2.4%
AIG 2%
Met Life 2.9%

After considering these metrics, I think Legal & General is an attractive value stock to buy today. In fact I have recently added it to my portfolio.

Only M&G currently offers better all-round value. But I’m willing to pay a bit of a premium for Legal & General’s superior brand strength and dominant market positions.

In my opinion, such financial services companies have tremendous long-term growth potential. Legal and General may struggle to grow business in the near term if consumer spending remains under pressure. But I think it could grow earnings strongly in the coming years due to demographic changes in the West.

It can use its strong balance sheet to capitalize on this opportunity. Its Solvency II ratio stood at 224% as of December. This financial strength also puts it in a good position to continue paying large dividends to its shareholders.


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