Should Investors Reconsider Allstate After 10% Price Drop and New Risk Model Announcements
October 29, 2025
If you’re eyeing Allstate and wondering whether now is the moment to buy more, hold on, or cash out, you’re not alone. The stock has captivated investors with its long-term surge: up 132.4% over the last five years and 63.1% over three. Yet, recent weeks have taken a different turn, with the price dipping 10.3% over the past month and down 1.5% just in the last week. Does this pullback signal an opportunity, or are caution lights flashing?
Some of this recent volatility has followed announcements about Allstate’s evolving risk models and shifting competitive dynamics in the insurance space. These moves have sparked debates in the market about how future claims costs and pricing trends will affect the company. Amidst these discussions, Allstate’s valuation is now at the forefront, especially since the company achieves a perfect value score of 6, being undervalued on all six major criteria analysts typically check.
Before jumping to conclusions, it’s smart to look closer at what goes into that impressive score. Each valuation method tells a different part of the story, from price-to-earnings to cash flow and beyond. In the next section, we’ll break down exactly how Allstate stacks up across these time-tested yardsticks. Later, I’ll share a perspective on valuation that could be even more insightful than the numbers alone.
The Excess Returns model is designed to assess how much profit a company generates for its shareholders above and beyond the minimum required return (its cost of equity). In other words, it measures the value created by reinvesting profits at rates higher than what investors expect, a crucial indicator for financial firms like Allstate.
For Allstate, the story is compelling. The company’s average return on equity is 23.01%, well above its cost of equity, which sits at $7.49 per share. For every share, Allstate’s book value is $83.40, and analysts estimate a stable earnings per share level of $25.44 moving forward (sourced from weighted future Return on Equity estimates from 11 analysts). The projected stable book value, based on 10 analyst forecasts, climbs to $110.54 per share. All told, this translates into an excess return of $17.95 per share, highlighting that Allstate’s investments are generating impressive value beyond required levels.
With these fundamentals, the intrinsic valuation suggests that Allstate stock is currently about 68.0% undervalued compared to what these excess returns imply. That indicates a significant margin of safety for investors, assuming the company can maintain this level of performance.
Result: UNDERVALUED
Our Excess Returns analysis suggests Allstate is undervalued by 68.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
Price-to-Earnings (PE) is a core valuation tool for analyzing profitable companies like Allstate. It measures how much investors are willing to pay for each dollar of earnings, making it a widely used way to quickly assess whether a stock is priced reasonably, richly, or at a discount. This metric makes the most sense for established and consistently profitable businesses where bottom-line earnings tell the core part of the story.
Growth expectations and risk factors are key to determining what a “normal” or “fair” PE should be. Higher growth companies and those with stable, predictable earnings often command above-average PE ratios, while more cyclical or riskier businesses see their multiples trend below the norm. For Allstate, the current PE sits at 8.8x, notably lower than both the industry average of 13.3x and the average of its direct peers at 11.4x. This alone suggests the market may not be giving full credit for Allstate’s earnings power or growth prospects.
However, Simply Wall St’s Fair Ratio pegs Allstate at 10.7x, a proprietary benchmark reflecting not just growth potential but also company-specific factors such as profit margins, industry conditions, market cap, and risk profile. The Fair Ratio offers a more balanced and tailored perspective than simply comparing with peers or industry averages, providing a nuanced view of what the stock realistically deserves in today’s market. With Allstate’s current PE only slightly below its Fair Ratio, the stock appears to be about fairly valued based on earnings multiples.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is more than just a number; it is your story about the company, tying together your own assumptions for future revenue, earnings, and profit margins with real financial forecasts and a calculated fair value.
Narratives help you see the connection between what you believe about Allstate and what the numbers actually show, making it easier to understand whether the stock’s price lines up with your expectations. Available on Simply Wall St’s Community page (used by millions of investors), Narratives let you quickly build, share, and refine your view about a company in just a few clicks. Because each Narrative links your outlook with a fair value and then directly compares it to the current price, you can quickly decide if now is the right time to buy, hold, or sell. You can also easily adjust your thinking as new earnings or breaking news arrives, since Narratives update with live data.
For example, some investors looking at Allstate’s latest analyst forecasts set their Narrative fair value as high as $275, optimistic about digital expansion and market share gains, while the lowest users estimate a fair value of $157, citing margin risks and increasing competition. Which story fits your view?
Do you think there’s more to the story for Allstate? Create your own Narrative to let the Community know!
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.
Companies discussed in this article include ALL.
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