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Mercury General Corporation (MCY) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Mercury General (MCY - Free Report) ? Shares have been on the move with the stock up 17.9% over the past month. The stock hit a new 52-week high of $62.68 in the previous session. Mercury General has gained 66.6% since the start of the year compared to the 7.5% move for the Zacks Finance sector and the 18.2% return for the Zacks Insurance - Property and Casualty industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2024, Mercury General reported EPS of $1.09 versus consensus estimate of $0.8 while it missed the consensus revenue estimate by 1.88%.

For the current fiscal year, Mercury General is expected to post earnings of $4 per share on $5.35 billion in revenues. This represents a 1233.33% change in EPS on a 18.13% change in revenues. For the next fiscal year, the company is expected to earn $6 per share on $5.88 billion in revenues. This represents a year-over-year change of 50% and 9.82%, respectively.

Valuation Metrics

Mercury General may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Mercury General has a Value Score of C. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 15.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 12.6X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 13.2X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Mercury General currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Mercury General meets the list of requirements. Thus, it seems as though Mercury General shares could have a bit more room to run in the near term.

How Does MCY Stack Up to the Competition?

Shares of MCY have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Skyward Specialty Insurance Group, Inc. (SKWD - Free Report) . SKWD has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of A.

Earnings were strong last quarter. Skyward Specialty Insurance Group, Inc. beat our consensus estimate by 21.21%, and for the current fiscal year, SKWD is expected to post earnings of $2.92 per share on revenue of $1.13 billion.

Shares of Skyward Specialty Insurance Group, Inc. have gained 1.6% over the past month, and currently trade at a forward P/E of 12.62X and a P/CF of 16.38X.

The Insurance - Property and Casualty industry is in the top 36% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MCY and SKWD, even beyond their own solid fundamental situation.


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