Investors interested in Insurance - Property and Casualty stocks are likely familiar with Allstate (ALL - Free Report) and RenaissanceRe (RNR - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Allstate has a Zacks Rank of #2 (Buy), while RenaissanceRe has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALL has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ALL currently has a forward P/E ratio of 10.98, while RNR has a forward P/E of 21.89. We also note that ALL has a PEG ratio of 1.32. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RNR currently has a PEG ratio of 2.30.
Another notable valuation metric for ALL is its P/B ratio of 1.54. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RNR has a P/B of 1.62.
Based on these metrics and many more, ALL holds a Value grade of A, while RNR has a Value grade of C.
ALL has seen stronger estimate revision activity and sports more attractive valuation metrics than RNR, so it seems like value investors will conclude that ALL is the superior option right now.