Investors interested in Insurance - Property and Casualty stocks are likely familiar with Allstate (ALL) and W.R. Berkley (WRB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Allstate has a Zacks Rank of #2 (Buy), while W.R. Berkley has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALL is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ALL currently has a forward P/E ratio of 8.68, while WRB has a forward P/E of 18.01. We also note that ALL has a PEG ratio of 0.74. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WRB currently has a PEG ratio of 2.63.
Another notable valuation metric for ALL is its P/B ratio of 2.4. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WRB has a P/B of 3.11.
These are just a few of the metrics contributing to ALL's Value grade of A and WRB's Value grade of C.
ALL is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ALL is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
