Stock Analysis of Allstate Corp.
This is a partial analysis of Allstate Corp.. The ticker symbol for Allstate Corp. is ALL. ALL is traded on the New York Stock Exchange and options are available on this stock.VALUE: ALL has a Value of $26.3 per share as of 09/11/00. Value is the foundation of any system. It is a measure of what a stock is currently worth. Value is based upon earnings, earnings growth rate, dividend payments, dividend growth rate, and financial performance. Current interest and inflation rates also play an important role in the computation of Value. When interest and/or inflation rates decrease, Value goes up. When interest rates and inflation increase, Value goes down. Sooner or later a stock's Price and Value always converge.
RV (Relative Value): ALL has an RV of 0.76. On a scale of 0.00 to 2.00, an RV of 0.76 is poor. RV reflects the long-term price appreciation potential of the stock compared to an alternative investment in AAA Corporate Bonds. Stocks with RV ratings above 1.00 have attractive upside potential. A stock will have an RV greater than 1.00 when its Value is greater than Price, and its Relative Safety (see below) and forecasted earnings growth rate are above average. In some cases, however, a stock's RV will be above 1.00 even though its Value is well below Price. This happens when a stock has an exemplary record of financial performance and an above average earnings growth rate. In this case, the stock is currently selling at a premium, and the investor is banking on future earnings growth to drive the stock's price higher. This information is very useful not only in knowing whether or not a stock has favorable price appreciation potential, but it also solves the riddle of whether to buy high growth, high P/E, or low growth, low P/E stocks. We believe that RV ratings above 1.00 are required to consistently achieve above average capital gains in the stock market.
RS (Relative Safety): ALL has an RS rating of 0.87. On a scale of 0.00 to 2.00, an RS of 0.87 is poor. Look at safety from the viewpoint of an equity investor (one who is buying stock of a company) rather than that of a purchaser of debt (one who is lending money to the company). From this perspective, consistency of financial and operating performance, stock price appreciation history, and price volatility are the key factors used in the evaluation of Relative Safety (RS). Debt to equity ratio, capitalization, sales volume, business longevity and other factors are also considered, but to a lesser degree.Favor steady, predictable performers. All stocks are rated on a scale of 0.00 to 2.00. A stock with an RS greater than 1.00 is safer and more predictable than the average of all stocks. A stock with an RS less than 1.00 is less predictable and riskier than the average stock.
GRT (Growth Rate): ALL has a GRT of -5 % per year. This is very poor. GRT stands for forecasted Earnings Growth Rate in percent per year. GRT is updated each week for every stock. Watch GRT trends very carefully. If the GRT trend is up, the stock's price will likely rise. If the GRT trend is down, the stock's price will increase more slowly, cease to increase, or subsequently fall.
GPE (Growth to P/E Ratio): ALL has a GPE of -0.45. This ratio suggests that ALL is overvalued. Growth to P/E ratio is a popular measure of stock valuation which compares Earnings Growth Rate (GRT) to Price Earnings ratio (P/E). A stock is considered to be undervalued when GPE is greater than 1.00, and vice-versa. RV is a much better indicator of long-term value. The RV of 0.76 for ALL is poor.
YSG (Yield-Safety-Growth): ALL has a YSG of 0.71. On a scale of 0.00 to 2.00, a YSG rating of 0.71 is poor. Combine Dividend YIELD, SAFETY and GROWTH into a single parameter. YSG allows direct comparison of all dividend paying stocks. Stocks with the highest YSG values have the best combinations of Dividend Yield, Safety and Growth. These are the stocks to buy for above average current income and long-term growth.
ALL has below average safety with well below average upside potential. It reflects a stock which is likely to give well below average, inconsistent returns over the long term.
Basic strategy should be to buy low risk, high reward stocks. We suggest that Prudent investors buy enough high Relative Value, high Relative Safety stocks to keep the overall RV and RS ratings of their portfolios above 1.00. As you do this, you'll find that your risk will go down and your investment performance will improve. Not a bad combination. Thank you for your interest.
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