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Allstate Corporation: Is it a Solid Choice for Value Investors?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put The Allstate CorporationALL stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Allstate Corporation has a trailing twelve months PE ratio of 16.02, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.50. While Allstate Corporation's current PE level puts it above its midpoint of 11.70 over the past five years, the current level stands well below the highs for the stock, suggesting that it could be a good entry point.

Further, the stock's PE stands way below the Zacks classified Insurance - Property/Casualty/Title industry's trailing twelve months PE ratio, which stands at 19.87. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Allstate Corporation has a forward PE ratio (price relative to this year's earnings) of just 12.50, so it is fair to say that a more value-oriented path may be ahead for Allstate Corporation stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Allstate Corporation has a P/S ratio of about 0.80. This is way lower than the S&P 500 average, which comes in at 3.00 right now, thus highlighting that the stock is quite undervalued from this aspect as well.

Broad Value Outlook

In aggregate, Allstate Corporation currently has a Zacks Value Style Score of 'A', putting it into the top 20% of all stocks we cover from this look. This makes Allstate Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Allstate Corporation is 1.56, a level that is slightly lower than the industry average of 1.60. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 6.78, which is far better than the industry average of 7.36. Clearly, ALL is a solid choice on the value front from multiple angles.

What About the Stock Overall?

While Allstate Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'C' and a Momentum score of 'B'. This gives ALL a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )

Notably, the company's recent earnings estimates have quite encouraging. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen seven up and just one down in the same time period.

This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has risen by 1.2% in the past two months, while the full year estimate has climbed 1.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Allstate Corporation (The) Price and Consensus

Allstate Corporation (The) Price and Consensus | Allstate Corporation (The) Quote

This bullish trend is why the stock boasts a Zacks Rank #2 (Buy) and why we are expecting outperformance from the company in the near term.

Bottom Line

Clearly, Allstate Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, the company boasts a solid industry rank (Top 25% out of over 250 industries), thereby adding a cherry on the cake. In fact, over the past one year, the Zacks Computer-Mini industry has outperformed the broader market, though marginally, as you can see below:

So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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