Today we're going to take a closer look at large-cap Finance company Allstate, whose shares are currently trading at $143.09. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Allstate's P/B and P/E Ratios Are Higher Than Average:
The Allstate Corporation, together with its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 12.38 and an average price to book (P/B) ratio of 1.58. In contrast, Allstate has a trailing 12 month P/E ratio of -17.9 and a P/B ratio of 2.98.
When we divide Allstate's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.61. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Business Is Unprofitable and Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $39,815 | $41,541 | $41,909 | $50,588 | $51,412 | $55,909 |
| Revenue Growth | n/a | 4.34% | 0.89% | 20.71% | 1.63% | 8.75% |
| Interest Income (MM) | $332 | $327 | $318 | $330 | $335 | $356 |
| Net Margins | 5% | 12% | 13% | 10% | 0% | 0% |
| Net Income (MM) | $2,160 | $4,847 | $5,576 | $5,192 | -$53 | -$42 |
| Depreciation & Amort. (MM) | $511 | $647 | $686 | $1,086 | $847 | $740 |
| Earnings Per Share | $5.7 | $14.03 | $17.31 | $4.96 | -$5.22 | -$7.93 |
| EPS Growth | n/a | 146.14% | 23.38% | -71.35% | -205.24% | -51.92% |
| Diluted Shares (MM) | 353 | 334 | 316 | 299 | 271 | 235 |
| Free Cash Flow (MM) | $4,898 | $4,696 | $5,183 | $4,771 | $4,701 | $3,709 |
| Capital Expenditures (MM) | $277 | $433 | $308 | $345 | $420 | $264 |
| Current Ratio | 2.91 | 40.94 | 99.29 | 62.61 | 70.36 | 72.22 |
| Total Debt (MM) | $82,817 | $84,153 | $87,196 | $64,904 | $80,410 | $86,498 |
Allstate's financial statements include several red flags such as weak operating margins with a unknown rate of growth, declining EPS growth, and irregular cash flows. Additionally, the firm has high levels of debt. On the other hand, the company has growing revenues and a flat capital expenditure trend working in its favor.
