The Allstate CorporationALLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $966.21 per share(market-calibrated)

+354.1%

Upside to Fair Value

Current

$212.76

Pure Model

$1,079.19

Fair Value

$966.21

Bull Case

$1,201.76

Bear Case

$938.22

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,079.19.

What's Driving This Ratingfor ALL

✓

CapEx already efficient

CapEx at 0.44% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 8.23% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $19.5B (23.85% margin).

→

Moderate revenue growth

Analyst consensus projects -6.45% revenue growth, fading to 2.50% by Year 10. Revenue reaches $81.7B (vs $66.5B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $1,385.14/share (34.2x terminal FCF) while exit multiple gives $773.24/share (16.2x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 74.30% indicates efficient cash generation. FCF reaches $15.2B by Year 10 (18.55% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.23

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)5.56%

Cost of Debt

Pre-tax Cost of Debt4.92%

Tax Rate21.97%

After-tax Cost of Debt3.84%

Equity Weight (E/V)88.13%

Debt Weight (D/V)11.87%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (88.13% × 5.56%) + (11.87% × 3.84%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$62.2B	$68.2B	$72.2B	$75.9B	$81.7B
EBIT	$5.1B	$5.6B	$11.1B	$15.1B	$19.5B
Tax	$1.1B	$1.2B	$2.4B	$3.3B	$4.3B
NOPAT	$4.0B	$4.4B	$8.7B	$11.8B	$15.2B
+ Depreciation	$687M	$755M	$799M	$839M	$904M
- Capex	$275M	$302M	$320M	$336M	$362M
- Δ NWC	-$1.3B	$798M	$529M	$555M	$598M
Free Cash Flow	$5.7B	$4.0B	$8.6B	$11.7B	$15.2B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$5.4B	$3.4B	$6.6B	$8.1B	$8.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$15.2B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$517.9B

PV of Terminal Value$303.2B

Exit Multiple Method

Year 10 EBITDA$20.4B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$244.8B

PV of Terminal Value$143.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$65.5B

PV of Terminal Value$303.2B

Enterprise Value$368.7B

(-) Net Debt$6.8B

Equity Value$361.9B

Shares Outstanding261M

Price per Share$1,385.14

Exit Multiple Method

PV of Projected FCFs$65.5B

PV of Terminal Value$143.3B

Enterprise Value$208.9B

(-) Net Debt$6.8B

Equity Value$202.0B

Shares Outstanding261M

Price per Share$773.24

Pure Model Fair Value

$1,079.19

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.50%	$1,632.95	$1,564.49	$1,499.25	$1,437.07	$1,377.79
4.50%	$1,173.93	$1,304.06	$1,499.25	$1,437.07	$1,377.79
5.50%	$929.89	$993.88	$1,079.19	$1,198.63	$1,377.79
6.50%	$773.61	$810.18	$855.89	$914.67	$993.04
7.50%	$662.45	$685.38	$712.88	$746.51	$788.53

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$938.22

341.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.29

Base Case

$1,079.19

407.2% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.23

Bull Case

$1,201.76

464.8% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-6.45%

Year 3 Revenue Growth4.06%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin8.23%

Terminal EBIT Margin28.00%

Tax Rate21.97%

Historical Capex / Rev0.44%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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