Things to consider before buying the LGEN share price

Legal & General is one of the UK’s largest financial services and insurance companies. Operating across investment management, lifetime mortgages, pensions, and annuities, the company has become a fixture for many British investors.

This article will give some factors to consider when planning to purchase the LGEN share price. We will analyze the PE ratio of LGEN over the years. We will also identify the company’s current leader, discuss the factors that must be considered when buying a stock, and examine how often the company pays dividends to its investors.

Who is the CEO of LGEN?

As of 2023, Sir Nigel Wilson serves as Group Chief Executive Officer of Legal & General, having held the role since June 2012. With an accounting background, Nigel joined Legal & General’s management division in 2009 – overseeing substantial growth before his promotion to CEO within three years.

Widely credited with repositioning Legal & General towards higher-margin investment products, Nigel Wilson has overseen a strong expansion in areas like pension de-risking solutions. Strategic overseas growth also remains high on the agenda under his leadership.

During 2023 and beyond, Nigel Wilson is tasked with steering LGEN through significant uncertainty amid rising inflation/rates and fears of global recession. But Legal & General’s balance sheet remains well-placed to ride out further storms.

What is the PE ratio of Legal and General?

Legal & General Group reported earnings per share (diluted) of £0.05 for the six months ended June 2023 and £0.32 for the trailing twelve months through June 2023 - based on the report of GuruFocus. This online resource provides historical, financial, and valuation data.

As of December 5, 2023, Legal & General Group’s share price stood at £2.274. For the trailing twelve months through June 2023, Legal & General Group’s EPS without NRI was £0.32. This translates to a PE ratio without NRI of 7.04 as of today.

Over the past 13 years, Legal & General Group’s PE ratio without NRI has ranged from a high of 17.78 to a low of 5.17, with a median PE of 11.27. Legal & General Group’s EPS growth over the last year was 30.2%, reflecting strong earnings momentum.

Over three, five, and ten years, EPS has increased at compound annual growth rates of 6.3%, 2.3%, and 9.6%, respectively. The highest 3-year EPS growth rate Legal & General has achieved in the last 13 years was 127.3% annually, demonstrating periods of very high earnings expansion.

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Should I buy Legal and General shares?

The relatively low PE ratio of 7.04 indicates the LGEN share price may be undervalued compared to historical norms (the 13-year median PE is 11.27). The high 30.2% EPS growth rate over the past year also signals the company’s profits are rapidly expanding. Furthermore, Legal & General has achieved very high 3-year earnings growth rates of over 127%, demonstrating strong profit potential.

However, the multi-year growth rates are more modest at 6.3% over three years and 2.3% over five years. So, the business does go through periods of fluctuating profit growth.

On balance, the low valuation, high 1-year earnings growth, and periods of high historic profit expansion suggest that the LGEN share price could represent a good investment opportunity. The company seems to be on an upward profit trajectory overall.

However, predictions are not guaranteed as future earnings may fluctuate. Before making a final call, one would need to assess factors like Legal & General’s business model sustainability, the economic outlook in its markets, competitor landscape, etc. However, its stock valuation and earnings performance indicate potential upside for investors willing to buy shares despite some uncertainties.

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How often does LGEN pay dividends?

As a mature blue-chip company, Legal & General has a long track record of dividends paid to shareholders. The company distributes dividend payments on a half-yearly basis, with payouts announced alongside its interim results (August) and final full-year results (March).

Throughout its three decades-plus as a listed entity, LGEN has aimed to deliver slow but steady dividend growth – avoiding any major cuts even through downturns. The current dividend yield stands around 7% - an attractive level for income investors amid volatile markets. Assuming continued asset growth and resilient insurance profits, the company’s yearly dividends appear safe to purchase LGEN share price now – although global recession risks warrant monitoring.

How can I tell if a stock is worth buying?

1. Valuation - Look at ratios like P/E, P/B, and P/S to see if the stock is undervalued or overvalued compared to historical averages and industry peers. Stocks trading at discounts to historical norms may be good value.
2. Growth prospects - Analyze expected earnings growth rates over the next few years. Higher expected growth can make a stock compelling. Compare growth rates to industry and market averages.
3. Competitive advantages - Examine proprietary technology, branding/customer loyalty, distribution advantages, and operating leverage that give a company an edge over competitors. This increases confidence in future growth.
4. Quality of management - Management’s track record in allocating capital and executing strategies is an important indicator of future performance. Look for discipline and past successes.
5. Macro and sector outlook - Context about the overall economic environment and outlook for the industry/sector is vital. A great company in a struggling sector is riskier.
6. Financial health - Check debt levels, cash flow generation, and working capital management to ensure the company has a strong financial foundation.

Ultimately, the best valuation and highest quality growth prospects tend to make the most appealing investments if reasonably priced.

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As a final thought

Before deciding to trade the LGEN share price, interested investors should research Legal & General’s business model sustainability, the economic and competitive outlook in its key markets, and how its dividend distributions could fare in a recession scenario.

There are no guarantees regarding share trading - even compelling valuations and past earnings growth offer no certainty that positive returns will follow. Approach any stock investment with eyes wide open to the risks.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”