Markel Group has been treading water for the past six months, recording a small return of 1.8% while holding steady at $2,060. The stock also fell short of the S&P 500’s 7.7% gain during that period.
Is now the time to buy Markel Group, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Markel Group Not Exciting?
We're sitting this one out for now. Here are three reasons we avoid MKL and a stock we'd rather own.
1. Net Premiums Earned Point to Soft Demand
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
Markel Group’s net premiums earned has grown at a 2.4% annualized rate over the last two years, much 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 slight deceleration versus its 3.6% annualized growth for the past two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
3. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Markel Group’s EPS grew at an unimpressive 13.2% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 3.6% 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 trailing the market in recent months, the stock trades at 1.4× forward P/B (or $2,060 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
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