Allstate Corporation Quarterly Stock Valuation

Oct. 20, 2014 2:00 PM ETThe Allstate Corporation (ALL)
Benjamin Clark profile picture
Benjamin Clark


  • ALL is suitable for the Enterprising Investor but not the Defensive Investor, following the ModernGraham approach.
  • According to the ModernGraham valuation model, the company is fairly valued at the present time.
  • The market is implying 3.18% earnings growth over the next 7-10 years, within a margin of safety of the company's actual growth in recent years.

Allstate Corporation (NYSE:ALL), like many insurance companies, has a business model that is perpetually attractive to value investors. After all, it can sometimes seem like the insured is simply providing funds for the insurer to invest, while the insurer is then free to earn a profit on the insured's premiums. However, true value investors know to keep a close eye on every company regardless of industry. Indeed, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment's merits. Here is a look at how Allstate Corporation fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham, and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation, in order to remove the subjective elements of emotion. This is best achieved 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.

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 1/3rd over the last 10 years using 3-year averages at the beginning and end of the period - FAIL
  5. Moderate PEmg (price over normalized earnings) 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 $60.64
MG Value $157.05
MG Opinion Undervalued
Value Based on 3% Growth $59.15
Value Based on 0% Growth $34.67
Market Implied Growth Rate 3.18%
PEmg 14.87
PB Ratio 1.17

Balance Sheet - 6/30/2014

Total Debt $5,846,000,000
Total Assets $110,233,000,000
Intangible Assets $1,219,000,000
Total Liabilities $87,361,000,000
Outstanding Shares 440,700,000

Earnings Per Share

2014 (estimate) $4.64
2013 $4.81
2012 $4.68
2011 $1.50
2010 $1.71
2009 $1.58
2008 -$3.06
2007 $7.77
2006 $7.84
2005 $2.64
2004 $4.54
2003 $3.85

Earnings Per Share - ModernGraham

2014 (estimate) $4.08
2013 $3.48
2012 $2.31
2011 $1.38
2010 $1.94
2009 $2.49

Dividend History

ALL Dividend Chart

ALL Dividend data by YCharts


Enterprising Investors following the ModernGraham approach should keep a keen eye on Allstate and pour some time into conducting further research. The Defensive Investor may not feel the same way, with concerns regarding the lack of earnings stability or growth over the last ten years. However, Enterprising Investors have no initial concerns, and should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company's intrinsic value.

The company has grown its EPSmg (normalized earnings) from $1.94 in 2010 to an estimated $4.08 for 2014. This is an outstanding level of growth, which significantly outpaces the market's implied estimate of only 3.18%. As a result of the strong growth demonstrated historically, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. Enterprising Investors are therefore encouraged to proceed with further research to determine whether Allstate Corporation is suitable for their own individual portfolios.

Be sure to check out previous ModernGraham valuations of Allstate Corporation for better perspective.

This article was written by

Benjamin Clark profile picture
Benjamin is one of TipRank's top bloggers.  He is the founder of, a value investing website devoted to the study and modernization of the teachings of Benjamin Graham.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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