Why I Think Legal & General Group Plc Is A Screaming Buy

I’m optimistic about Legal & General Group Plc’s (LON: LGEN) prospects and here’s why…

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Legal & General (LSE: LGEN) (NASDAQOTH: LGGNY.US) is a company that has had a strong few years and, as such, I’m thinking of buying a stake in it.

Indeed, looking back on the last four years, it is clear that Legal & General has been relatively stable — especially compared to other life insurance companies.

Profit over the last four years has lacked growth but, when the highly challenging economic circumstances are taken into account, this is a decent result in my opinion.

Furthermore, although earnings per share (EPS) have dipped slightly over the period, profit has lacked the volatility of many of its peers. This gives me, a potential investor, a great deal of confidence in the business for the simple reason that, were trading conditions to deteriorate further, Legal & General has the capacity to maintain profits when many peers seemingly do not.

Of course, the future is always more important than the past and in this regard Legal & General may surprise you.

EPS is forecast to grow at a very healthy rate over the next couple of years, with the market pricing in growth of 11% this year and 9% next year. Although such rates are likely to be trumped by other financials, they tend to have been loss making and/or starting from a much lower base than Legal & General, thereby making higher growth rates easier to generate.

However, in my view, 10% growth per annum over two years when the economy is not in a boom period is pretty good.

Furthermore, Legal & General looks to offer good value at the moment — another key reason why I’m thinking of adding it to my portfolio. For instance, Legal & General trades on a price-to-book ratio of just 2.35. This may not be as low as some of its financial peers but, when the quality, reliability and track record of the business is taken into account, I think it shows that shares offer good value for money.

Certainly, goodwill of 135% of the company’s net assets does not sound expensive to me, when you consider that those assets are resilient and capable of generating a profit during a pronounced downturn.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Peter does not own shares in Legal & General.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »