SHOULD YOU BUY SHARE IN Legal & General (UK STOCK Analysis )
LSE:LGEN
Due to the recent global issue to the economy has been halted and the stock market has took a major hammering!
Is this the end of the world? Or is this the greatest time to invest in the stock Market?
Legal & General is a FTSE 100 life assurance, investment management and general insurance provider.
It’s not easy to judge the direct affect that this recent global issue will have on Legal & General, but in the companies outlook statement it did say it has “confidence” in its capacity for future growth and paying shareholder dividends.
Indeed, the firm claims to have a “strong” balance sheet, with £7.3bn in surplus regulatory capital, and “significant buffers to absorb a market downturn.”
With Legal & Generals share price at 67% below it’s fair value, could this be a great value dividend stock?
In this video, we shall find out!
LETS DIVE IN!
Legal & General has a high level of cyclicality
It’s shares have been virtually moving sideways over the past five years, despite steady advances in earnings and increases in the shareholder dividend.
Strangely the Legal & General stock behaves a lot like big London-listed bank shares.
How did Legal & General Perform during the previous recessions?
During the 2008 financial crisis the share price crashed by around 80% in the wake of the credit crunch and the recession which followed. It’s share price again acted very similar to the banks. However, also like many of the banks it did bounce back stronger.
Has Legal & General Evolved?
Legal & General is very cyclical, however there latest report explains that over “the past several years”, Legal & General has evolved into a “high growth/high return” business when previously it used to be a “lower growth/lower return” company.
Business Strategy?
How does Legal & General plan to grow earnings?
. Firstly, they plan to focus on large markets where the company has a small market share and where it can outpace the general market growth.
It’s second tactic is to target growth markets where it already has a leading market share and where it can grow by maintaining its leadership in that market.
Recent Challenges?
Short sellers have tried to push down the Legal & Generals price in recently weeks, but it keeps bouncing back up! Which is a good sign.
The share price plummeted by 10% in a week when fear-mongers betted it would follow Lloyds, Barclays and RBS and cancel its 2020 full-year dividend.
However, the CEO Nigel Wilson confirmed he would pay a 12.64 percent final dividend. This £753m loyalty bonus confirms to me that the balance sheet is strong enough to ensure the company gets through these short term issues.
DEEP DIVING INTO THE STOCK! (Screen capture video )
- Trading at 67.4% below its fair value
- Revenue is forecast to grow 3.54% per year
- Earnings grew by 64.8% over the past year
FINAL THOUGHTS?
Overall top management teams at Legal & General have confidence in the future of the company. They’ve put their money where their mouth is by completing a large amount of insider share purchases in the company.
The dividend growth also looks set to continue and Earnings per share rose by 16% compared to the previous year.
Over five years, the shareholder payment has increased by just over 50%
And with a P/E ratio of just 6, this offers a large margin of safety. So I did purchase shares in this company.
I WOULD LOVE TO KNOW YOUR THOUGHTS ON LEGAL & General AS A BUSINESS AND AS A STOCK SO PLEASE DO COMMENT BELOW.
