Allstate Corporation Investors Have Been In Good Hands; Will It Continue?

The Allstate Corporation ALL has been a major winner for investors over the past few years. Even if that continues, though, are shares worth holding at their current valuation?

What The Bulls See…

Put simply, Allstate bulls see the company as a giant ATM machine, perhaps because it has been just that. Over the past half-decade, shares have risen from around $15 to more than $61 currently, with a dividend yield near 2 percent to boot. The strong technical picture is a big factor for the market's current comfort level as well.

Fundamentally, Allstate sports an enterprise value that exceeds its market capitalization, a price-to-sales of 0.77, a price-to-book of 1.27 and a price-to-earnings ratio of around 11 times next year's consensus estimates (versus expected EPS growth of 14 percent according to some analysts).

What The Bears See…

The bearish camp points to an overbought stock that is getting very close to major horizontal line resistance created by its all-time highs from 2007.

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This point, however, has very little onto which the bears can grasp from a fundamental basis. Only a massive slew of storms -- or other natural disasters -- might dampen the fundamental picture for Allstate, and in reality, the company may simply need to raise premiums by a slight margin to compensate for any losses.

What's The Chart Telling Us?

Most technicians say Allstate could be due for a healthy pullback, or at the very least, a consolidation phase. They note that a nice entry point for aspiring bulls would be on a pullback in price to the $51.20 horizontal line support.

By then, the overbought condition would be worked off fully and strong historical support would provide a nice backstop for long positions. Those looking to sell Allstate will do so at their own peril, according to technicians.

However, if sales are to be made at all, analysts say they should be executed as close to identifiable resistance as possible. The nearest horizontal lines of resistance come into play at $63.22 and $66.14.

Overall…

Allstate truly defines a “buy the dip” stock situation. Pullbacks in this fundamentally sound, inexpensive, yet overbought stock should be treated as buying opportunities. Only the most adventurous souls need play on the short side in this stock.