Investors interested in Insurance - Property and Casualty stocks are likely familiar with Mercury General (MCY - Free Report) and W.R. Berkley (WRB - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Mercury General is sporting a Zacks Rank of #2 (Buy), while W.R. Berkley has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MCY has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
MCY currently has a forward P/E ratio of 13.28, while WRB has a forward P/E of 20.04. We also note that MCY has a PEG ratio of 0.31. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WRB currently has a PEG ratio of 2.23.
Another notable valuation metric for MCY is its P/B ratio of 1.64. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WRB has a P/B of 1.67.
These metrics, and several others, help MCY earn a Value grade of A, while WRB has been given a Value grade of C.
MCY stands above WRB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MCY is the superior value option right now.