5 reasons why Legal & General shares are too cheap

 5 reasons why Legal & General shares are too cheap

I'm really surprised Legal & General Group (LSE: LGEN ) shares are trading at such low prices this summer. My wife and I have owned this stock for over a year, but the stock price has been declining during this period.

Legal and general stock slide

For the record, we bought L&G shares into our family portfolio in July 2022 and paid an all-in price of almost 247p per share.As I write, the FTSE 100 stock is trading at 230.1p, valuing the life insurer and asset manager at almost £13.8bn. This means that we have a paper loss of around 6.7% on our holding. Meh.

At its 52-week high, Legal & General shares peaked around 288p last August. However, the liquidity/solvency crisis among mid-sized US banks sent financial stocks around the world tumbling in March.Here's an example of how L&G's share price has performed over seven periods:

Although the stock is down almost a tenth in six months and more than 18% in 12 months, I'm surprised it's lost value in five years. However, these returns do not include cash dividends, which are very generous at L&G.I see L&G shares as too cheapIf we didn't already own shares in Legal & General, I'd like to buy them today. Here are five reasons why:

Financial strength

Legal & General's solvency ratio – one of the key indicators of an insurer's financial stability – has risen significantly since the COVID-19 crisis. At the end of last year, L&G had a solid solvency coverage ratio of 236%. At the end of 2022, it thus held £9.9 billion of excess capital. Over time, I would expect some of this additional capital to be returned to shareholders through dividends and share buybacks.Apart from a brief hit during the coronavirus-hit 2020, Legal & General has increased its earnings per share (EPS) every year since 2011. In 2011, EPS reached 12.42p, while last year it reached a record 38.33p. That's a fantastic record of earnings growth, which I hope will continue for years to come.

 Delicious dividends

We bought L&G shares primarily for their ability to generate extra passive income for our portfolio in the future. Dividends per share totaled 6.4p in 2011. Last year it was 19.37p – and I expect that payout to continue to rise.At its current price, L&G shares are trading at a low multiple of 6.3 times earnings, yielding a solid 15.8%. That covers the current dividend yield of 8.4% per annum by nearly 1.9 times, a comfortable margin of safety.

L&G publishes results for the first half of 2023 on Tuesday 15 August. If these numbers are as good as I hope they are, then this could act as a new catalyst to push the stock back up.Of course, I could be wrong because if the financial markets crash again (as they did in 2022), L&G's profits could take a hit. Even so, I consider this stock to be a Footsie champion in the long run!The post 5 Reasons Why Legal & General Shares Are Too Cheap appeared first on The Motley Fool UK.

5 stocks for trying to build wealth after 50

Inflation recently hit 40-year highs… the “cost of living crisis” looms… the prospect of a new Cold War with Russia and China looms large, while the global economy could be teetering on the brink of recession.Whether you're a novice investor or a seasoned pro, deciding which stocks to add to your buy list can be a daunting prospect in such unprecedented times. Still, we think that despite recent stock market gains, many stocks are still trading at a discount to their true value.Fortunately, The Motley Fool UK's team of analysts have shortlisted five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We share the names in a special FREE investment report that you can download today. We believe these stocks could be a great fit in any well-diversified portfolio to build wealth in your 50s. Cliff D'Arcy has an economic interest in Legal & General Group shares. The Motley Fool UK has no position in any of the stocks listed. The opinions expressed about the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse array of insights makes us better investors.

When it comes to investing, identifying undervalued stocks can be a lucrative strategy. Legal & General, a leading player in the financial services industry, offers an interesting investment opportunity. Despite an impressive track record and strong fundamentals, its stock appears to be trading at a discount. In this article, we explore five compelling reasons why Legal & General stock is currently undervalued and why savvy investors should take note.

 Robust financial performance:Legal & General has consistently demonstrated strong financial performance with a history of steady revenue growth and healthy profit margins. Its diversified portfolio, including insurance, pensions and investment management, provides a steady stream of income. "Legal and General Financial Results."

Attractive dividend yield:

For income-seeking investors, Legal & General offers an attractive dividend yield that outperforms many competitors. A company's commitment to returning value to shareholders through dividends demonstrates its stability and confidence in future cash flows. Keyword: "Legal and general dividend yield."

Solid market position:

Legal & General's long-standing presence in the financial industry has earned it a strong position in the market. Its reputation for reliability and innovation gives it a competitive edge. As demand for financial services continues to grow, Legal & General is well positioned to capitalize on this trend. Keyword: "Legal and general market position."

Favorable trends in the industry:

The continued shift towards retirement planning and increased awareness of the importance of insurance and investment products bode well for Legal & General. With an aging population and greater emphasis on financial security, the company is poised to benefit from these favorable industry trends. Keyword: "Legal and general industry trends."

Strong management team:

A company is only as good as its management, and Legal & General's management team is a strength. Their strategic vision and prudent decision-making have guided the company through various economic cycles and demonstrated resilience and adaptability. Keyword: "Legal and General Management Team."

With a combination of solid financial results, attractive dividends, a strong market position, favorable industry trends and a capable management team, Legal & General shares are truly undervalued. Investors looking for a promising opportunity in the financial sector should consider adding shares of Legal & General to their portfolio. As the market begins to realize the true value of this company, early investors could reap significant rewards. Keyword: "Legal & General Undervalued Stocks."