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 6.7% to $214.50 per share while the index has gained 8%.
Is now the time to buy ALL? Find out in our full research report, it’s free.
Why Does ALL Stock Spark Debate?
Born from a Sears, Roebuck & Co. initiative during the Great Depression with its famous "You're in good hands" slogan, Allstate (NYSE: ALL) is one of America's largest personal property and casualty insurers, offering protection for autos, homes, and personal property.
Two Things to Like:
1. Long-Term Revenue Growth Shows Strong Momentum
Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services.
Luckily, Allstate’s revenue grew at a solid 9.4% compounded annual growth rate over the last five years. Its growth surpassed the average insurance company and shows its offerings resonate with customers.
2. Growing BVPS Reflects Strong Asset Base
Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.
Although Allstate’s BVPS increased by a meager 6.9% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at an incredible 34.9% annual clip over the past two years (from $63.05 to $114.75 per share).
One Reason to Be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Allstate’s revenue to rise by 3%, a deceleration versus its 8.7% annualized growth for the past two years. This projection doesn’t excite us and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
Final Judgment
Allstate has huge potential even though it has some open questions, but at $214.50 per share (or 1.7× forward P/B), is now the time to initiate a position? See for yourself in our full research report, it’s free.
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