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Should Value Investors Buy Mercury General (MCY) Stock?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Mercury General (MCY - Free Report) . MCY is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.14, which compares to its industry's average of 27.25. MCY's Forward P/E has been as high as 17.42 and as low as 10.32, with a median of 14.75, all within the past year.

Investors should also recognize that MCY has a P/B ratio of 1.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. MCY's current P/B looks attractive when compared to its industry's average P/B of 1.42. Within the past 52 weeks, MCY's P/B has been as high as 2.03 and as low as 1.06, with a median of 1.58.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. MCY has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.71.

Finally, investors should note that MCY has a P/CF ratio of 5.34. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. MCY's current P/CF looks attractive when compared to its industry's average P/CF of 15.10. Over the past year, MCY's P/CF has been as high as 14.88 and as low as 4.94, with a median of 10.15.

Value investors will likely look at more than just these metrics, but the above data helps show that Mercury General is likely undervalued currently. And when considering the strength of its earnings outlook, MCY sticks out at as one of the market's strongest value stocks.


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