Allstate has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 10.6% to $208.84 per share while the index has gained 6.4%.
Is there a buying opportunity in Allstate, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Allstate Not Exciting?
We don't have much confidence in Allstate. Here are three reasons why there are better opportunities than ALL and a stock we'd rather own.
2. Growing BVPS Reflects Strong Asset Base
We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.
Although Allstate’s BVPS was flat over the last five years. the good news is that its growth has recently accelerated as BVPS grew at an incredible 27.1% annual clip over the past two years (from $51.59 to $83.40 per share).
3. Previous Growth Initiatives Haven’t Impressed
Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.
Over the last five years, Allstate has averaged an ROE of 11.6%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.
Final Judgment
Allstate isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 2.4× forward P/B (or $208.84 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at one of our all-time favorite software stocks.
Stocks We Like More Than Allstate
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