Over the past six months, Allstate has been a great trade, beating the S&P 500 by 11%. Its stock price has climbed to $255.94, representing a healthy 22% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy ALL? Or are investors being too optimistic? 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 Positive Attributes:
1. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Allstate’s EPS grew at 19.3% compounded annual growth rate over the last five years, higher than its 8.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Growing BVPS Reflects Strong Asset Base
We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.
Although Allstate’s BVPS increased by a meager 7.3% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at an incredible 40.9% annual clip over the past two years (from $62.85 to $124.79 per share).
One Reason to Be Careful:
Net Premiums Earned Point to Soft Demand
Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.
Allstate’s net premiums earned has grown at a 6.2% annualized rate over the last two years, slightly worse than the broader insurance industry and slower than its total revenue.
Final Judgment
Allstate’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 1.9× forward P/B (or $255.94 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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