Allstate Corp. (NYSE:ALL) is an American insurance company offering property and casualty insurance as well as life, accident, and health insurance products through its subsidiaries. The company was founded in 1931 and is headquartered in Northbrook, IL.
Allstate Corp's stock is trading at $134, as of 21 Mar 2022, and year-to-date (YTD), it is up by 13%. Over the past year, the stock is up by 19% whilst the S&P 500 is up by 13%, which means that the stock has performed better than the broader market over this period.
But what is Allstate Corp's outlook as a long-term investment investment opportunity?
The importance of fundamentals
To better understand the underlying trends at Allstate Corp and analyze if the company will be a good 'buy and hold' investment, it’s good to start by getting an overview of the fundamentals.
Investors have relied on fundamentals for decades to assess the financial health of an organization as well as its growth prospects. They are a set of key metrics that, when looked at holistically, can tell us whether or not a company is likely to be a good investment over the long term.
There are potentially dozens of fundamental metrics to analyze, but we'll be focusing on the price to earnings ratio (P/E ratio), earnings per share (EPS) and price to book value (P/BV).
What do Allstate Corp’s fundamentals tell us about the investment opportunity? Let's have a look.
Allstate Corp's key metrics
First, let's look at its EPS, which serves as an indicator of profitability. This metric is calculated by taking a company's net income (after dividends on preferred stock) and dividing this by the number of outstanding shares.
Allstate Corp's EPS is 18.6 based on its most recent financial statements, and year-on-year, it increased by 8%. This is encouraging growth.
Another key metric to look at is the P/E ratio because it immediately tells a potential investor how cheap or expensive the stock is. The ratio tells us how much investors are willing to pay for a company’s earnings, and it is calculated by taking the price of a stock and dividing it by the EPS. A higher ratio suggests that the stock is expensive in relation to its earnings, and a lower ratio indicates it might offer more value.
Based on its most recent financial statements, ALL has a P/E ratio of 7.2. This is 30% lower than the average P/E ratio across an industry benchmark, which is 10.3, and indicates that the stock is quite inexpensive in relation to how much it earns.
Another key metric to look at is a company's price to book value (P/BV), which tells us how much investors are willing to pay for a company's assets. It is calculated by the company's stock price divided by its net assets (or 'book value', meaning the value of all assets which appear 'in its book'). P/BV is used by value investors to identify potential investments, and a P/BV of 1 is usually considered a solid investment.
According to its most recent financial statements, Allstate Corp's P/BV is 1.6, which is 2% lower than the industry benchmark of 1.7.
Is Allstate Corp worth a look?
When we looked at the trends with Allstate Corp’s stock, we liked what we saw.
To be more specific, the stock is up by 13% YTD and up by 19% over the past year, which is encouraging. Moreover, the company is showing positive EPS growth y/y, has a lower P/E ratio and a lower P B/V compared to competitors within the same industry. This gives us confidence that the company is on the right track.
With all of this in mind, we think the future is bright for Allstate Corp and it’s certainly worth a closer look.
Keep in mind that this analysis is general in nature. No single ratio or number will give you all of the information you need, and they must be weighed along with other considerations. Please conduct your own due diligence before deciding to invest.
