Allstate Corporation Quarterly Valuation – July 2014 $ALL

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Allstate fares in the ModernGraham valuation model.

Company 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. Allstate primarily distributes its products through exclusive agencies, financial specialists, independent agencies, call centers and the Internet. In April 2014, Allstate completed sale of Lincoln Benefit Life company to Resolution Life Holdings Inc.
ALL Chart

ALL data by YCharts

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

Key Data:

Recent Price $58.97
MG Value $153.38
MG Opinion Undervalued
Value Based on 3% Growth $57.77
Value Based on 0% Growth $33.86
Market Implied Growth Rate 3.15%
PEmg 14.80
PB Ratio 1.16

Balance Sheet – 3/31/2014

Total Debt $6,200,000,000
Total Assets $124,291,000,000
Intangible Assets $1,243,000,000
Total Liabilities $102,186,000,000
Outstanding Shares 434,000,000

Earnings Per Share

2014 (estimate) $4.35
2013 $4.81
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 

2014 (estimate) $3.98
2013 $3.49
2012 $2.31
2011 $1.38
2010 $1.95
2009 $2.50

Dividend History
ALL Dividend Chart

ALL Dividend data by YCharts


Allstate Corp is suitable for Enterprising Investors but not for Defensive Investors, who are concerned with the lack of earnings stability over the last ten years and the lack of earnings growth over the same period.  The company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Travelers Companies (TRV). As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.95 in 2010 to an estimated $3.98 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.15% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Allstate Corp (ALL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Allstate Corp (ALL) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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