PFG

We rate PRINCIPAL FINANCIAL GROUP INC (PFG) as a Reduce with a composite score of 49.2/100 at a current price of $94.85. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (65th percentile) and stability (56th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (33th percentile) and value (39th percentile) tempers our overall conviction. We assign a No Moat rating (24/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

PRINCIPAL FINANCIAL GROUP INC holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 49.2/100 places it at rank #2123 in our full 7,333-stock universe. With a $18.5B market capitalization, PRINCIPAL FINANCIAL GROUP INC operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Despite positive momentum (65th percentile), revenue contraction of -15% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 2% (-15.4pp vs sector) and net margins of 3.4%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $94.85, PRINCIPAL FINANCIAL GROUP INC is trading at a premium to fundamental value. Our value factor score of 39/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 38.8x (a 225% premium to the sector median of 11.9x), EV/EBITDA of 50.9x (at a premium), P/B of 1.8x, P/S of 1.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to PRINCIPAL FINANCIAL GROUP INC. The company exhibits strong financial stability with a beta of 1.12, conservative leverage (33% D/E), and a stability factor in the 56th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (33th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 56th percentile and quality factor at the 33th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 3.64% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate PRINCIPAL FINANCIAL GROUP INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 4.5%, and the balance sheet is managed within acceptable parameters (D/E: 33%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; PRINCIPAL FINANCIAL GROUP INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 3.64% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, PRINCIPAL FINANCIAL GROUP INC receives a Reduce rating with a composite score of 49.2/100 (rank #2123 of 7,333). Our quantitative framework assigns a No Moat (24/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 47/100.

Our analysis does not support a constructive view on PRINCIPAL FINANCIAL GROUP INC at this time. The combination of limited competitive advantages, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.