Which Insurance Stock Will Outpace Allstate (ALL) and Berkshire Hathaway (BRK.B) in 2024?
Which Of The Following: Casualty Record $1.80 Now
Property and casualty (P&C) insurance is seen as essential and is in constant demand regardless of the state of the economy, providing a steady source of income for businesses in this industry.
Furthermore, there will probably be a sharp increase in the need for P&C insurance due to the global rise in natural disasters.
In light of this, I have evaluated the fundamentals of two market titans, The Allstate Corporation (ALL – Get Rating) and Berkshire Hathaway Inc. (BRK.B – Get Rating), in this article to see which one might be a better investment option.
2023 has been designated as the year of natural catastrophic events because of the rise in the frequency and intensity of calamities like storms, cyclones, earthquakes, wildfires, droughts, floods, landslides, and cyclones, outpacing the figures from previous years.
There will be a greater need for insurance coverage for buildings, residences, and automobiles as more people relocate to cities and urban infrastructure grows.
The P&C insurance market, which hit a record $1.80 trillion in 2023, is expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2024 to 2032.
Furthermore, technological developments will determine the direction of the P&C insurance sector. They use tools like generative AI, which emphasizes proactive risk management, to get access to more talent and information with cutting-edge capabilities.
With the help of technology, insurers can shift from a reactive to a more proactive approach in risk management, with the goal of reducing losses.
Moreover, Fitch Ratings expects the industry to perform better in 2024, driven by better performance in the personal auto segments as a result of rate increases, a moderating effect on the trends in the severity of claims, and an increase in investment income as a result of higher yields.
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Similarly, ALL surged 27.4% over the last half-year compared to BRK.B’s 6.4% gain. Furthermore, over the previous month, ALL’s shares have slightly increased, ending the most recent trading session at $138.39.
On the other hand, during the same time frame, shares of BRK.B fell 1.2%, closing the most recent trading session at $365.95.
In order to determine which of the highlighted Insurance – Property & Casualty stocks is a better choice, let’s take a closer look at their comparison.
Current Financial Situation
For the fiscal third quarter that concluded on September 30, 2023, BRK.B’s total revenues were $93.21 trillion. Its net loss decreased by 362.9% and 365.7% from the same quarter last year to $12.57 billion and $5.88 per share, respectively.
Furthermore, as of December 31, 2022, the company’s cash and cash equivalents were $25.57 billion, a 20.7% decrease from $32.26 billion.
Furthermore, the company’s cash balance as of September 30, 2023, was $860 million, 16.8% more than it was as of December 31, 2022, when it was $736 million.
Historical and Projected Financial Results
Over the previous three years, the revenue of BRK.B has increased at a CAGR of 12.3%. For the first quarter of fiscal 2024, which ends in March 2024, Street projects BRK.B’s revenue and EPS to rise 3.1% and 21.4%, respectively, year over year to $88.08 billion and $4.28.
On the other hand, over the last three years, ALL’s revenue has increased at a CAGR of 9.6%. Analysts project that ALL will generate $14.46 billion in revenue in the first quarter of its fiscal 2024 (which ends in March 2024) compared to a 4.9% year-over-year increase in earnings per share of $3.37.
Turnover
BRK.B has a 0.36x trailing-12-month asset turnover ratio, whereas ALL has a 0.56x ratio. But BRK.B’s levered FCF margin of 18.29% and trailing-12-month gross profit of 27.99% are higher than ALL’s, which are 9.75% and 11.48%, respectively.
Assessment
BRK.B has a forward EV/Sales ratio of 2.10x, which is 162.5% greater than ALL’s 0.80x. Moreover, the forward Price/Sales ratio of 2.18x for BRK.B is 240.6% greater than that of 0.64x for ALL.
Consequently, ALL is less expensive.
POWR Scores
According to our exclusive POWR Ratings system, BRK.B has an overall rating of C, which is equivalent to Neutral. In contrast, ALL receives a B overall, which indicates a Buy.
The POWR Ratings are determined by taking into account 118 distinct factors, each of which is optimally weighted.
In contrast, ALL’s mixed valuation metrics support its C grade for Value. The industry average of 11.94x is 62.9% lower than the stock’s forward EV/EBIT multiple of 19.45x. Its projected Price/Sales ratio of 0.64x, however, is 76.6% less than the 2.75x industry average.
Furthermore, BRK.B’s stability grade is C, which is consistent with its 60-month beta of 0.86. However, ALL’s Stability B grade is in line with its 60-month beta of 0.54.
In addition to the previously mentioned factors, we have rated the stocks for quality, sentiment, and momentum. To view BRK.B’s ratings, click this link. Here are the ratings for EVERYONE.
The Victor
The insurance industry’s customer base may be strengthened by the increased frequency of natural disasters, which would benefit both BRK.B and ALL. However, ALL may be a better investment option for your portfolio due to its superior financials and lower valuation than BRK.B.
Investing in stocks that have an overall rating of Strong Buy increases one’s chances of success, according to our research. See all of the top-rated stocks in the Property & Casualty – Insurance sector right here.
What Comes Next?
Steve Reitmeister, a 43-year investment veteran, recently unveiled his 2024 market outlook, trading strategy, and the top 11 selections for the upcoming year.
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