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Is Legal & General Group one of the FTSE 100’s greatest value shares?

Hopes of falling interest rates have lifted the FTSE 100 in recent weeks. Yet Legal & General Group (LSE:LGEN) shares have failed to ignite despite the boost that rate cuts would give to its operations.

Legal & General's share price performance.
Created with TradingView

At 246.9p per share, the financial services giant has actually fallen in value since the start of the second quarter. The Footsie, on the other hand, is up by low-to-single-digit percentages over the period.

This means that — on paper at least — Legal & General’s share price still looks like one of the London stock market’s greatest bargains. Here’s why.

All-round value

Firstly, the company looks dirt cheap when based on earnings forecasts for the current year.

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Today, it trades on a forward price-to-earnings (P/E) ratio of 10.2 times, below the FTSE 100 average of 11 times. But what really grabs my attention is its rock-bottom price-to-earnings growth (PEG) ratio of 0.1.

Any reading below 1 indicates that a share is undervalued relative to its predicted growth trajectory.

On top of this, the firm’s dividend yield for 2024 provides a spectacular sweetener. At 8.6%, this is more than twice the UK blue-chip average of 3.5%.

Sector value

It’s important to remember that the FTSE 100 consists of companies spanning a wide variety of sectors. For this reason, it’s also a good idea to compare how Legal & General stacks up to many of its industry rivals in terms of value.

Company

Forward P/E ratio

Forward dividend yield

Aviva

11.3 times

7.4%

 Prudential

10.5 times

2.3%

 Allianz

10.6 times

5.7%

 Aegon

8.1 times

5.5%

 AXA

9.5 times

6.4%

 MetLife

8.3 times

2.9%

 Average

 9.7 times

 5%

As we can see, the Footsie firm’s reputation as a value stock becomes more blurred based on the industry average.

Its dividend yield comfortably beats its peer group average by a good three-and-a-half percentage points.

It offers less impressive value based on earnings however. Its P/E ratio of 10.2 times is above the industry average. However, the margin between this and the broader industry’s corresponding readout is pretty thin.

Here’s my take

On balance, I believe Legal & General shares are very attractive at current prices. It’s why I’ve been recently buying them for my Self-Invested Personal Pension (SIPP).

I was especially attracted by the company’s gigantic dividend yields. The passive income streams I might receive could go a long way to supercharging my long-term wealth.

Any dividend income I receive would be ploughed back into the market to buy even more stocks. This snowball effect (known as compounding) can significantly grow the size of my portfolio over time.

And by buying Legal & General shares, I’d likely have more to spend than if I’d invested in lower-yield companies. I’m confident that dividends from the business will rise steadily over time too.

The financial services giant has to overcome heavy competitive pressures to grow profits. But Legal & General has a great track record on this front, helped by its substantial brand power and wide range of industry-leading products.

This is a top value share I plan to hold for the long haul.

The post Is Legal & General Group one of the FTSE 100’s greatest value shares? appeared first on The Motley Fool UK.

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Royston Wild has positions in Aviva Plc, Legal & General Group Plc, and Prudential Plc. The Motley Fool UK has recommended Prudential Plc. Views expressed on the companies mentioned in this article are those of the writer 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 range of insights makes us better investors.

Motley Fool UK 2024