Should Value Investors Buy Mercury General (MCY) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is Mercury General (MCY). MCY is currently sporting a Zacks Rank #1 (Strong Buy) and an A for Value. The stock is trading with a P/E ratio of 12.08, which compares to its industry's average of 26.61. Over the past year, MCY's Forward P/E has been as high as 163.64 and as low as 6.83, with a median of 13.27.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MCY has a P/S ratio of 0.83. This compares to its industry's average P/S of 1.33.

Finally, investors will want to recognize that MCY has a P/CF ratio of 9.50. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 12.26. MCY's P/CF has been as high as 10.18 and as low as 4.83, with a median of 7.64, all within the past year.

Investors could also keep in mind Universal Insurance Holdings (UVE), another Insurance - Property and Casualty stock with a Zacks Rank of #2 (Buy) and Value grade of A.

Additionally, Universal Insurance Holdings has a P/B ratio of 1.58 while its industry's price-to-book ratio sits at 1.46. For UVE, this valuation metric has been as high as 1.89, as low as 1.19, with a median of 1.54 over the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Mercury General and Universal Insurance Holdings are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MCY and UVE feels like a great value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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