Which Stock Is the Better Value Option?
Investors interested in insurance/property-casualty stocks have likely heard of Hanover Insurance Group (THG) and Allstate (ALL). But which of these two stocks offers value investors better value right now? We need to take a closer look.
We’ve found that the best way to spot great opportunities is to combine a strong Zacks rank with a great note in the Value category of our Style Scores system. The proven Zacks Rank focuses on earnings estimates and estimate revisions, while our Style Scores are designed to identify stocks with specific characteristics.
Hanover Insurance Group and Allstate are currently Zacks ranks of #2 (Buy) and #5 (Strong Sell), respectively. The Zacks Rank favors stocks whose earnings estimates have recently been revised positively, so investors can rest assured that THG has a better earnings outlook. However, value investors will care about a lot more than just that.
Value investors are also interested in a number of proven valuation metrics that show when a company is undervalued at its current share price level.
The Style Score Value assessment considers a variety of fundamental metrics, including popular price-to-earnings ratio, price-to-earnings ratio, earnings yield, cash flow per share, and a number of other key stats commonly used by value investors .
THG currently has a forward P/E of 14.72, while ALL has a forward P/E of 19.45. We also note that THG has a PEG ratio of 0.37. This metric is used in a similar way to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. ALL currently has a PEG ratio of 2.78.
Another notable valuation metric for THG is its P/B ratio of 2.19. The P/B ratio compares a stock’s market value to its book value, which is defined as total assets minus total liabilities. For comparison, ALL has a P/B of 2.33.
These metrics and a few others help THG earn an A score, while ALL earned a C score.
THG currently has an improved earnings outlook, which makes it stand out in our Zacks Rank model. And based on the valuation metrics above, we think THG is probably the highest value option right now.
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The Hanover Insurance Group, Inc. (THG): Free Stock Research Report
The Allstate Corporation (ALL): Free Stock Research Report
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