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3 Reasons to Sell MKL and 1 Stock to Buy Instead

MKL Cover Image

Markel Group currently trades at $1,928 per share and has shown little upside over the past six months, posting a middling return of 2.9%.

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

Why Is Markel Group Not Exciting?

We're cautious about Markel Group. Here are three reasons why MKL doesn't excite us and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Markel Group’s net premiums earned has grown at a 2.9% annualized rate over the last two years, much worse than the broader insurance industry and slower than its total revenue.

Markel Group Trailing 12-Month Net Premiums Earned

2. Revenue Projections Show Stormy Skies Ahead

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 drop by 6.4%, a decrease from its 4.5% 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 a weak 8% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Markel Group Trailing 12-Month EPS (Non-GAAP)

Final Judgment

Markel Group isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.4× forward P/B (or $1,928 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at one of our top software and edge computing picks.

Stocks We Like More Than Markel Group

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