ModernGraham Valuation: Allstate Corp (ALL)

moneyCompany Profile (obtained from Google Finance): The Allstate Corporation (Allstate) is a holding company for Allstate Insurance Company. The Company’s business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and their affiliates. It is engaged, principally in the United States, in the property-liability insurance, life insurance, retirement and investment product business. Allstate’s primary business is the sale of private passenger auto and homeowners insurance. The Company also sells several other personal property and casualty insurance products, select commercial property and casualty coverages, life insurance, annuities, voluntary accident and health insurance and funding agreements. It conducts its business primarily in the United States. Allstate has four business segments: Allstate Protection, Allstate Financial, Discontinued Lines and Coverages and Corporate and Other. In October 2011, the Company acquired Esurance and Answer Financial from White Mountains Insurance Group.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $58.22
MG Opinion Fairly Valued
Value Based on 3% Growth $47.51
Value Based on 0% Growth $27.85
Market Implied Growth Rate 3.89%
PEmg 16.28
PB Ratio 1.17

Balance Sheet – 9/30/2013 

Total Debt $6,217,000,000
Total Assets $122,285,000,000
Intangible Assets $1,243,000,000
Total Liabilities $101,505,000,000
Outstanding Shares 456,000,000

Earnings Per Share

2013 (estimate) $4.18
2012 $4.68
2011 $1.51
2010 $1.71
2009 $1.58
2008 -$3.07
2007 $7.77
2006 $7.98
2005 $2.66
2004 $4.79
2003 $3.85

Earnings Per Share – ModernGraham 

2013 (estimate) $3.28
2012 $2.31
2011 $1.38
2010 $1.95
2009 $2.50
2008 $3.32


Allstate Corp (ALL) had a negative year in 2008, but that was now long enough ago that the Enterprising Investor will overlook it.  The Defensive Investor, however, looks at a longer period and requires positive earnings for at least ten straight years; consequently the company is suitable for the Enterprising Investor but not the Defensive Investor.  Enterprising Investors should feel comfortable proceeding with further research, beginning with a review of ModernGraham’s Valuation of Travelers Companies.  From a valuation perspective, the company has not seen significant growth in EPSmg (normalized earnings) when looking at the full six year history, but it has seen some growth in the last few years that may support the market’s current implied growth estimate of 3.89%.  As a result, the company would appear to be fairly valued.

What do you think?  Do you agree that Allstate Corp is fairly valued?  What would be your assessment?  Is the company suitable only for Enterprising Investors?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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Disclaimer:  The author did not hold a position in Allstate Corp (ALL) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill





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