New business keeps on rolling
A combination of terrific organic growth, bubbly acquisition activity and shrewd product investment has helped to drive business at Legal & General through the roof in recent times.
Indeed, the insurers Investment Management arm saw assets under management (AUMs) advance 7% during January-June, to 465m, while total assets climbed 13% to 653.7m. And in my opinion the firm is in prime position to keep custom ticking higher in coming years.
The business decision to focus on five long-term macroeconomic and demographic trends is clearly paying dividends, with the business investing heavily in developing products and services tailored to an ageing clientele, changing welfare legislation and rising digital business.
For example, Legal & General acquired 100% of Cofunds, the UKs biggest investment platform, for 175m early last year to cotton onto rising internet flows. And the companys ability to chuck up masses of capital net cash generation leapt 13% during the first half to 567m should facilitate further bolt-on acquisitions.
As well, the company is also spreading the cash to expand its global footprint and take advantage of rising disposable incomes and low market penetration in emerging regions. This drive helped to propel total international assets 35% higher during the first half alone to 82.8m.
Meanwhile, the companys mission to spread its exposure across the insurance, savings and investment markets should help it to avert any potential slowdown in any one market and keep growth rattling higher.
Double-digit growth on the cards
Against this backdrop, City brokers expect the business to follow last years 10% earnings advance with identical growth both this year and next, to 16.7p and 18.3p respectively.
These estimates leave Legal & General changing hands on P/E ratings of 14.3 for 2014 and 13.1 for 2015, below the standard of 15 which represents reasonable value for money and just under a prospective average of 14.5 for the complete life insurance sector.
Furthermore, expectations of solid double-digit earnings growth through to next year creates a price to earnings to growth (PEG) figure of 1.4 for both 2014 and 2015. Although just outside the benchmark of 1 or below which suggests spectacular value, this figure is still hugely attractive if not drop-dead gorgeous.
Obviously Legal & General can hardly be considered heart-stopping value given these medium-term earnings projections. But in my opinion Legal & Generals focussed investment drive looks poised to deliver relentless earnings expansion beyond next year, making it an exceptional growth pick for savvy investors.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.