Investors in Legal & General (LSE: LGEN) (NASDAQOTH: LGGNY.US) have enjoyed a great year, with shares in the financial services company posting gains of 24%. This looks even more impressive when compared to the FTSE 100, which is currently up just 3% over the same period. However, changes to pensions in the recent budget caused shares to fall by over 10%. Does this mean that Legal & General is now great value? Moreover, is it still a super growth stock?
Growth Potential
After sluggish performance during the darkest days of the credit crunch, Legal & General has posted two strong years of earnings per share (EPS) growth, with 2012 and 2013 both being double-digit years for the bottom-line. This is highly impressive and shows that the company, although mature, is still able to locate and benefit from growth opportunities within its sector.
Indeed, the strong growth of the last two years is forecast to continue during the next two years, with the market expecting EPS to increase by 11% in 2014 and by 7% in 2015. Both of these figures are well-ahead of the forecast for the wider market, which is expected to only post mid-single digit growth over the next two years.
Good Value
As mentioned, shares in Legal & General have risen sharply over the last year. However, they still seem to offer good value (helped by the recent fall) based on the price to earnings (P/E) ratio. It currently stands at 12.7, which not only indicates attractive absolute value, but also highlights good relative value because the FTSE 100’s P/E is slightly higher at around 13.2. So, even though shares are not quite as attractive as they were twelve months ago (due to their rise in price), they still appear to represent decent value for money at current levels.
Looking Ahead
Despite shares in Legal & General falling by over 10% last week as a result of changes to pensions legislation, they still appear to have a very bright future. This is evidenced by the strong earnings growth forecasts over the next two years and, furthermore, growth seems to be on offer at a very reasonable price — as evidenced by the relatively low P/E ratio. As a result, Legal & General appears to remain a super growth stock.
