Has Allstate’s Strong Multi Year Rally Already Priced In Its Improved Profitability?

• Wondering if Allstate at around $209 a share is still a smart buy or if the easy money has already been made? This breakdown will help you decide whether the current price matches the company’s true value.
• After a 4.2% gain over the last week, Allstate is still up 9.1% year to date and 10.5% over the past year, adding to an already strong 68.1% 3 year and 123.1% 5 year run that has shifted how the market views its growth and risk profile.
• Much of this move has been underpinned by improving underwriting discipline and a more data driven approach to pricing policies, which has strengthened confidence in the durability of its margins. At the same time, regulatory approvals for premium increases in several key states have given investors more visibility into how Allstate can offset inflation and weather related losses.
• Despite that backdrop, our valuation framework gives Allstate a solid 5/6 value score, suggesting the stock still screens as undervalued on most of the checks we run. Next we will unpack those different valuation approaches, then finish with an even more intuitive way to think about what the market is really pricing in.

Allstate delivered 10.5% returns over the last year. See how this stacks up to the rest of the Insurance industry.

Approach 1: Allstate Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate above the minimum return investors demand on its equity, then capitalizes those surplus profits into an intrinsic value per share.

For Allstate, the starting point is its Book Value of $97.34 per share and a Stable EPS of $29.07 per share, based on weighted future Return on Equity estimates from 12 analysts. That implies an Average Return on Equity of 23.76%, which is well above the Cost of Equity of $8.51 per share. The gap between these two figures creates an Excess Return of $20.56 per share, and when this is applied to a Stable Book Value of $122.36 per share, it supports a valuation comfortably above the current market price.

On Simply Wall St’s Excess Returns framework, this translates to an intrinsic value of about $678 per share, implying the stock is roughly 69.1% undervalued versus the current price around $209.

Result: UNDERVALUED

Our Excess Returns analysis suggests Allstate is undervalued by 69.1%. Track this in your watchlist or portfolio, or discover 909 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Allstate.

Approach 2: Allstate Price vs Earnings

For a consistently profitable business like Allstate, the price to earnings, or PE, ratio is a practical way to judge value because it directly links what investors pay today to the company’s current earnings power. In general, companies with faster, more predictable growth and lower perceived risk are often associated with higher PE ratios, while slower growing or riskier names tend to trade on lower multiples.

Allstate currently trades on a PE of about 6.64x, which is meaningfully below both the Insurance industry average of roughly 13.41x and a peer group average near 12.62x. That discount suggests the market is still cautious about the sustainability of its recent earnings rebound. To go a step further, Simply Wall St’s Fair Ratio framework estimates what PE a stock might trade on after accounting for its growth outlook, profitability, risk profile, size and industry. This can be more tailored than a simple peer or sector comparison.

On this Fair Ratio basis, Allstate screens at around 9.00x, above its current 6.64x multiple. The difference between these figures indicates the shares currently appear undervalued relative to this framework.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Allstate Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simply your story about a company, expressed through your own assumptions for its future revenue, earnings, margins and fair value, then linked directly to today’s share price.

A Narrative connects three things in a single, easy framework: how you think Allstate’s business will evolve, what that means for a financial forecast, and the fair value you believe those future cash flows support.

On Simply Wall St, Narratives are an accessible tool inside the Community page used by millions of investors. There you can see and create scenarios, then instantly compare the resulting Fair Value to the current Price to decide whether a stock looks like a buy, hold or sell to you.

Because Narratives are updated dynamically when new earnings, news or guidance arrives, your view on Allstate can evolve in real time. For example, one investor might build a more bullish Narrative closer to $275 per share based on strong digital execution and pricing power. A more cautious investor might align with a $157 view that leans into catastrophe risk and margin pressure, and the platform lets you see and stress test both side by side.

Do you think there's more to the story for Allstate? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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