Prudential Financial (PRU -0.17%) was a big winner in 2021 as its stock rose 38.6%, according to data provided by S&P Global Market Intelligence, beating out the S&P 500's return of 27% during the same time.
The company, which provides life insurance and other financial products, saw an improvement from the year before, when the coronavirus pandemic and the market volatility that followed weighed heavily on its business. In response, management has made a concerted effort to change its business product mix in 2021, which has made investors optimistic.
2020 weighed heavily on Prudential Financial. The coronavirus pandemic and the market volatility around that hurt its underlying business. As a result, the company's revenue declined 12% from 2019 while posting a net loss of $146 million during the year, its first net loss since 2013.
Management didn't sit around idly, though. Going in 2021, it had a plan to cut costs and focus on selling products with higher growth potential that were also less sensitive to market conditions. Its goal is to create cost savings of $750 million by 2023 -- and $590 million has come in 2021 alone.
To accomplish this, the company sold off several businesses over the past year and a half, including its insurance businesses in Korea and Taiwan. It also sold off its full-service record-keeping business and a portion of its variable annuities business. Overall, these sales will generate $6 billion in proceeds to reinvest in higher-growth products.
These measures and an improved economic backdrop helped the company see revenue grow 33% through the first three quarters, while net income of $6.5 billion improved from its $1.2 billion loss from the same period the year before.
Prudential has a rock-solid balance sheet, with $400 billion in bonds and cash assets along with a meager debt-to-equity ratio of 0.6. The company also trades at a cheap valuation, with a price-to-earnings ratio (P/E) of 6.2, while its price to tangible book value is 0.7. As a result, it's cheaper than it has been for much of the past decade.
Its balance sheet strength and reasonable valuation, along with its 4% dividend yield, make Prudential a solid value stock that should continue to deliver for investors. The company is scheduled to announce its fourth-quarter earnings results on Feb. 3.