Allstate trades at $215.36 and has moved in lockstep with the market. Its shares have returned 7.5% over the last six months while the S&P 500 has gained 3.1%.
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Why Is Allstate Not Exciting?
We're cautious about Allstate. Here are two reasons why ALL doesn't excite us and a stock we'd rather own.
1. 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 2.8%, a deceleration versus its 8.1% annualized growth for the past two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.
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 3.4% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at an incredible 35.2% annual clip over the past two years (from $60.19 to $110.03 per share).
Final Judgment
Allstate isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 1.7× forward P/B (or $215.36 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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