Stock market

Is Legal & General Group one of the biggest stocks in the FTSE 100?

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Hopes of interest rate cuts are over. FTSE 100 in recent weeks. Yet Legal and General The group (LSE:LGEN) shares have failed to ignite despite the boost that a rate cut will give to its operations.

Share price performance of Legal & General.
Created with TradingView.

At 246.9p per share, the financial services giant has actually fallen in value since the start of the second quarter. Footsie, on the other hand, has grown by a low to single-digit percentage over the period.

This means that – on paper at least – Legal & General’s share price still looks like one of the biggest bargains on the London stock market. Here’s why.

All-round value

First, the company looks cheap based on the current year’s revenue forecast.

Today, it trades at a forward price-to-earnings (P/E) ratio of 10.2 times, which is 11 times below the FTSE 100 average. But what really catches my attention is its price-to-earnings growth (PEG) ratio of 0.1.

Any reading below 1 indicates that a share is undervalued relative to its predicted growth rate.

On top of that, the firm’s profitable output to 2024 provides a wonderful dessert. At 8.6%, this is more than double the UK blue-chip average of 3.5%.

Sector value

It is important to remember that the FTSE 100 is made up of companies spanning a wide range of sectors. For this reason, it’s also a good idea to compare how Legal & General stacks up against many of its industry competitors in terms of value.

Company Forward P/E ratio Forward dividend yield
Aviva 11.3 times 7.4%
Prudential 10.5 times 2.3%
Allianz 10.6 times 5.7%
Aegon 8.1 times 5.5%
AXA 9.5 times 6.4%
Met Life 8.3 times 2.9%
Average 9.7 times 5%

As we can see, Footsie Firm’s reputation as a value stock gets more blurred based on the industry average.

Its dividend yield comfortably beats its peer group average by three and a half percentage points.

However, it offers a less impressive value on an earnings basis. Its P/E ratio is higher than the industry average of 10.2 times. However, the gap between this and the broader industry’s corresponding readout is quite slim.

Here is my opinion

On balance, I believe legal and generic shares are very attractive at current prices. This is why I recently bought them for my Self Invested Personal Pension (SIPP).

I was particularly drawn to the company’s huge dividend yield. The passive income streams I can get can go a long way to supercharge my long-term wealth.

Any dividend income I receive will be put back into the market to buy even more stock. This snowball effect (called compounding) can significantly increase the size of my portfolio over time.

And by buying legal and common shares, I have the potential to spend more than if I were to invest in lower-yielding companies. I am sure that with the passage of time the profits from the business will also increase continuously.

The financial services giant has to overcome heavy competitive pressure to increase profitability. But Legal & General has a strong track record on this front, helped by its considerable brand strength and wide range of industry-leading products.

This is a high value part that I plan to keep for the long haul.

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