Why Allstate (ALL) is a Momentum Stock to Watch

Understanding the Zacks Premium and Its Benefits

Investing in the stock market can be a powerful way to grow wealth, regardless of your age or experience level. For many investors, the goal is to make informed decisions that lead to long-term success. Zacks Premium offers a range of tools and resources designed to help investors achieve these goals with greater confidence and knowledge.

One of the key features of Zacks Premium is its daily updates on the Zacks Rank and Zacks Industry Rank. These rankings provide valuable insights into the performance and potential of different stocks. Additionally, members gain full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens. These tools are essential for anyone looking to become a more informed and confident investor.

Another important component of Zacks Premium is the Zacks Style Scores. These scores are a unique set of guidelines that evaluate stocks based on three popular investment styles: value, growth, and momentum. They were developed as complementary indicators to the Zacks Rank, helping investors identify securities with the best chances of outperforming the market over the next 30 days.

Breakdown of the Zacks Style Scores

Each stock receives a rating of A, B, C, D, or F based on its value, growth, and momentum characteristics. The higher the score, the better the chance the stock will outperform. An A is considered better than a B, which is better than a C, and so on.

The Style Scores are divided into four categories:

Value Score

Value investors focus on finding stocks that are undervalued relative to their true worth. The Value Style Score takes into account financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow. These metrics help identify companies that may be trading below their intrinsic value, offering potential for future gains.

Growth Score

Growth investors look for stocks with strong future prospects and solid financial health. The Growth Style Score evaluates factors like projected and historical earnings, sales, and cash flow. This helps investors find companies that are likely to experience sustainable growth over time.

Momentum Score

Momentum investors follow trends, believing that "the trend is your friend." The Momentum Style Score uses data such as one-week price changes and monthly percentage changes in earnings estimates to determine favorable times to invest in high-momentum stocks.

VGM Score

For investors who prefer a balanced approach, the VGM Score combines all three investing styles—value, growth, and momentum. It provides a comprehensive evaluation of each stock, making it an essential tool when used alongside the Zacks Rank. The VGM Score helps narrow down companies with attractive value, strong growth forecasts, and promising momentum.

How Style Scores Work with the Zacks Rank

The Zacks Rank is a proprietary stock-rating model that leverages earnings estimate revisions to help investors build successful portfolios. Since 1988, stocks ranked #1 (Strong Buy) have delivered an average annual return of +23.75%, significantly outperforming the S&P 500.

However, the Zacks Rank rates a large number of stocks, and there are often over 800 top-rated stocks at any given time. This makes it challenging for investors to choose the best options for their portfolios.

This is where the Style Scores come into play. Investors should focus on stocks with a Zacks Rank of #1 or #2 that also have Style Scores of A or B. Even if a stock has a #3 (Hold) rank, it should still have A or B scores to maximize upside potential.

It’s crucial to consider the direction of a stock’s earnings estimate revisions when making investment decisions. The Style Scores were designed to work in conjunction with the Zacks Rank, ensuring a more accurate assessment of a stock's potential.

For example, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even with high Style Scores, may still have a downward-trending earnings forecast, increasing the risk of a declining share price. Therefore, the more stocks you own with a #1 or #2 Rank and A or B Style Scores, the better your chances of success.

Stock to Watch: Allstate (ALL)

Allstate Corporation, founded in 1931 and headquartered in Northbrook, IL, is the third-largest property-casualty (P&C) insurer in the U.S. and the largest publicly-held personal lines carrier. The company also offers life insurance and investment products to millions of households through its extensive network of agencies and financial specialists.

Currently, Allstate has a Zacks Rank of #3 (Hold) and a VGM Score of A. Despite this, the stock has a Momentum Style Score of A, with shares rising 6.3% over the past four weeks. Nine analysts have recently revised their earnings estimates upward for fiscal 2025, with the Zacks Consensus Estimate increasing to $20.34 per share. Allstate also has an average earnings surprise of +57.7%.

With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, Allstate is a stock worth considering for investors seeking growth opportunities.