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PRU: Good Company For Good Long-Term Play

|Includes: Prudential Financial, Inc. (PRU)


A growing Asset Management unit.

Management prudently keeps on reducing debt and improving margins.

Shows how PRU is undervalued.

Prudential Financial, Inc (NYSE:PRU) is one of the biggest insurance companies in the world with a strong track record, yet it remains undervalued on almost every possible valuation metric shown below. Prudential has exposure to variable annuities, which are sensitive to equity markets. During times of volatility, as we’ve seen in Q1, the stock has taken a hit. However during bear markets, Prudential has put in place hedging strategies to protect its earnings. Prudential is most likely to benefit during rising interest rates and rising equity markets, but it is well-shielded during bear markets. One of the things I find most interesting about PRU and like the most about their business model is their strong Asset Management unit, PGIM. With $1.264 Trillion in AUM, PGIM is the ninth biggest asset manager in the world. PGIM continues to deliver strong results and over the last decade, 88% of the company’s funds have outperformed their benchmarks. Overall, the company continues to decrease their debt and improve their margins.

Trailing P/E:


Forward P/E:


PEG Ratio:






BV/Share (mrq):


PEG Ratio is defined as P/E divided by earnings growth rate. It tells you how much you are paying for future growth. When the ratio is below 1, it is telling you the company is undervalued or priced below it expected growth rate. A Price-to-Sales ratio of .71 means you are paying $.71 for every $1 of revenue the company makes. A Price-to-Book ratio of .8 means that you are buying the company for $.80 on the dollar, giving you a margin of safety of 125%. Below is a 5-year DCF valuation I’ve performed on PRU.

The model above states if you buy PRU at its current share price of $103 (as of 4/11 closing) and expect the average FCF of $14B to grow at a compounded annual growth rate of 5% for the next 5 years, you should expect a return of about 37%.

Disclosure: I am/we are long PRU.

Additional disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.