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Allstate (ALL) has a bullish Chaikin Power Gauge rating. It recently made a new 7 year high on the back of a very strong 2nd quarter earnings report in late July. ALL reported earnings per share of $1.01 vs. analyst estimates of $0.71. The stock gapped higher and has continued strong with only the mildest of pullbacks in the past few days.
Allstate is the second largest personal insurer in the U.S. and the largest publicly traded personal insurer with over 16 million households served. ALL has an ongoing corporate effort to streamline its operations and provide better customer service with the goal of living up to its familiar “you’re in good hands” slogan.
In October of 2011 Allstate acquired Esurance to establish its own online presence, and policies have grown 82% in the 3 years that ALL has owned Esurance. Policy growth was up 17.5% in the 2nd quarter but growth has slowed a bit as the company has successfully improved its loss ratio through selectivity in the self-directed insurance area.
It is in the financial area that Allstate has shone. Profitability and premium growth far exceed industry averages but valuations are still under historical norms. ALL sells at 10.7 x projected 2015 estimates vs. its historical norm of 13 x. At a 1.3 x price to book value ratio, Allstate is also below the industry average. ALL has substantial free cash flow and returns it to shareholders through its 1.83% dividend yield and a $2.5 billion buyback program announced in February which is 40% completed. The remainder of the program should enable ALL to further shrink its market capitalization by 5%.
In the strong Insurance group, Allstate stands out and with top line revenue growth averaging over 3% the past three years, ALL’s free cash flow continues to grow. The combination of revenue growth combined with increased profitability means that Allstate is an attractive long-term investment with significant upside potential if valuations increase to reflect the progress that ALL has made over the past 3 years. Janney Capital Markets insurance analyst Robert Glassspiegel projects 18% upside potential to 71.75 based on increasing valuations.
ALL has a bullish Chaikin Power Gauge rating that is driven by very strong Financial Metrics and very bullish technicals. Analysts have been paring back their ratings on Allstate but with the financial metrics so strong, this supports the upside case as the analysts will inevitably join the party.
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NASDAQ Chaikin Power Indexes based on the Chaikin Power Gauge Rating
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
