3 Reasons to Sell MKL and 1 Stock to Buy Instead

Over the past six months, Markel Group has been a great trade, beating the S&P 500 by 6.6%. Its stock price has climbed to $1,977, representing a healthy 11.8% increase. This run-up might have investors contemplating their next move.

Is there a buying opportunity in Markel Group, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Markel Group Not Exciting?

We’re glad investors have benefited from the price increase, but we don't have much confidence in Markel Group. Here are three reasons why we avoid MKL and a stock we'd rather own.

1. Net Premiums Earned Points to Soft Demand

While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.

Markel Group’s net premiums earned has grown at a 3.8% annualized rate over the last two years, worse than the broader insurance industry and slower than its total revenue.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Markel Group’s revenue to stall, a deceleration versus its 10.6% annualized growth for the past two years. This projection is underwhelming and implies its products and services will face some demand challenges.

3. Recent EPS Growth Below Our Standards

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Markel Group’s EPS grew at an unimpressive 14.7% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 10.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

Markel Group isn’t a terrible business, but it doesn’t pass our bar. With its shares beating the market recently, the stock trades at 1.4× forward P/B (or $1,977 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Would Buy Instead of Markel Group

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