We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
MCY Rallies 22.6% YTD, Trades at Premium: Should You Buy the Stock?
Read MoreHide Full Article
Key Takeaways
{\"0\":\"MCY grows steadily with higher premiums and a strong Property and Casualty segment.\",\"1\":\"Net investment income expands with higher yields and a growing asset base.\",\"2\":\"Strong liquidity with cash and investments supports operations and growth.\"}
Shares of Mercury General Corporation (MCY - Free Report) are trading at a premium compared with the Zacks Insurance - Property and Casualty industry. Its price-to-book value of 2.29X is higher than the industry average of 1.54X. It has a Value Score of A.
Image Source: Zacks Investment Research
However, shares of other insurers, such as Arch Capital Group Ltd. (ACGL - Free Report) and First American Financial Corporation (FAF - Free Report) , are trading at a multiple lower than the industry average, while Cincinnati Financial Corporation (CINF - Free Report) shares are trading at a premium.
MCY’s Price Performance
Shares of MCY have gained 22.6% in the year-to-date period, outperforming its industry growth of 7.9% and outperforming both the sector and the Zacks S&P 500 Composite, each of which gained 14.9%.
The insurer has a market capitalization of $4.5 billion. The average volume of shares traded in the last three months was 0.3 million.
MCY vs. Industry, Sector & S&P 500 YTD
Image Source: Zacks Investment Research
Projections for MCY
The Zacks Consensus Estimate for 2025 revenues is pegged at $5.8 billion, implying a year-over-year improvement of 7.9%. The consensus estimate for MCY’s current-year earnings is pegged at $4.50 per share, down 37.4% from the year-ago reported figure. The consensus estimate for 2026 earnings per share and revenues indicates increases of 64.4% and 6.5%, respectively, compared to the 2025 estimates. It has a Growth Score of A.
Optimistic Analyst Sentiment on MCY
The Zacks Consensus Estimate for 2025 earnings per share has skyrocketed 1000% in the past two months, while the same for 2026 earnings has climbed 41%.
Image Source: Zacks Investment Research
Target Price for MCY Suggests Upside
Based on short-term price targets offered by one analyst, the Zacks price target is $90 per share. The average indicates a 9.6% upside from the last closing price.
Image Source: Zacks Investment Research
MCY’s Favorable Return on Capital
Return on equity (ROE) for the trailing 12 months was 16.6%, comparing favorably with the industry’s 7.7%. This reflects its efficiency in utilizing shareholders’ funds.
Return on invested capital in the trailing 12 months was 9.6%, better than the industry average of 5.9%, reflecting MCY’s efficiency in utilizing funds to generate income.
Factors Favoring MCY
Mercury General has been gaining ground by relying on a set of core organic strengths. Premiums have trended steadily higher, supported by rate increases across insurance lines and a growing base of policies. The Property and Casualty segment has also held up well, signaling a stable backdrop for the company’s operations. These organic drivers are lifting Mercury General’s top line and shaping the path for continued expansion.
Over the past five years, the top line grew at a compound annual growth rate of 7.6%, supported by higher net premiums earned and other revenues. California remains a key driver, with higher rates in the homeowner’s line and a growing number of auto policies strengthening the company’s premium base.
Net investment income has also played a key role in Mercury General’s growth. Over the past five years, it grew at a compound annual rate of 15.7%, supported by higher average yields and a larger base of invested assets. With floating-rate investments, the company anticipates that investment income in 2025 will remain close to the 2024 levels, continuing to provide a reliable contribution to overall revenue.
Mercury General’s strong liquidity position further supports its growth. With combined cash and short-term investments of $1.4 billion as of June 30, 2025, the company has sufficient resources to meet its operational needs. Historical cash generation has also been solid, with average annual net cash from operations over the past decade providing ample coverage for liquidity requirements.
Conclusion
Overall, Mercury General’s steady premium growth, resilient Property and Casualty segment, strong investment income and solid liquidity position provide a robust foundation for continued expansion. These strengths, combined with a favorable return on equity, highlight the company’s consistent ability to generate shareholder value. A VGM Score of A instills confidence.
With strong growth prospects, favorable estimates, and an attractive return on capital, this Zacks Rank #1 (Strong Buy) insurer presents a compelling opportunity for potential investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
MCY Rallies 22.6% YTD, Trades at Premium: Should You Buy the Stock?
Key Takeaways
Shares of Mercury General Corporation (MCY - Free Report) are trading at a premium compared with the Zacks Insurance - Property and Casualty industry. Its price-to-book value of 2.29X is higher than the industry average of 1.54X. It has a Value Score of A.
However, shares of other insurers, such as Arch Capital Group Ltd. (ACGL - Free Report) and First American Financial Corporation (FAF - Free Report) , are trading at a multiple lower than the industry average, while Cincinnati Financial Corporation (CINF - Free Report) shares are trading at a premium.
MCY’s Price Performance
Shares of MCY have gained 22.6% in the year-to-date period, outperforming its industry growth of 7.9% and outperforming both the sector and the Zacks S&P 500 Composite, each of which gained 14.9%.
The insurer has a market capitalization of $4.5 billion. The average volume of shares traded in the last three months was 0.3 million.
MCY vs. Industry, Sector & S&P 500 YTD
Projections for MCY
The Zacks Consensus Estimate for 2025 revenues is pegged at $5.8 billion, implying a year-over-year improvement of 7.9%. The consensus estimate for MCY’s current-year earnings is pegged at $4.50 per share, down 37.4% from the year-ago reported figure. The consensus estimate for 2026 earnings per share and revenues indicates increases of 64.4% and 6.5%, respectively, compared to the 2025 estimates. It has a Growth Score of A.
Optimistic Analyst Sentiment on MCY
The Zacks Consensus Estimate for 2025 earnings per share has skyrocketed 1000% in the past two months, while the same for 2026 earnings has climbed 41%.
Target Price for MCY Suggests Upside
Based on short-term price targets offered by one analyst, the Zacks price target is $90 per share. The average indicates a 9.6% upside from the last closing price.
MCY’s Favorable Return on Capital
Return on equity (ROE) for the trailing 12 months was 16.6%, comparing favorably with the industry’s 7.7%. This reflects its efficiency in utilizing shareholders’ funds.
Return on invested capital in the trailing 12 months was 9.6%, better than the industry average of 5.9%, reflecting MCY’s efficiency in utilizing funds to generate income.
Factors Favoring MCY
Mercury General has been gaining ground by relying on a set of core organic strengths. Premiums have trended steadily higher, supported by rate increases across insurance lines and a growing base of policies. The Property and Casualty segment has also held up well, signaling a stable backdrop for the company’s operations. These organic drivers are lifting Mercury General’s top line and shaping the path for continued expansion.
Over the past five years, the top line grew at a compound annual growth rate of 7.6%, supported by higher net premiums earned and other revenues. California remains a key driver, with higher rates in the homeowner’s line and a growing number of auto policies strengthening the company’s premium base.
Net investment income has also played a key role in Mercury General’s growth. Over the past five years, it grew at a compound annual rate of 15.7%, supported by higher average yields and a larger base of invested assets. With floating-rate investments, the company anticipates that investment income in 2025 will remain close to the 2024 levels, continuing to provide a reliable contribution to overall revenue.
Mercury General’s strong liquidity position further supports its growth. With combined cash and short-term investments of $1.4 billion as of June 30, 2025, the company has sufficient resources to meet its operational needs. Historical cash generation has also been solid, with average annual net cash from operations over the past decade providing ample coverage for liquidity requirements.
Conclusion
Overall, Mercury General’s steady premium growth, resilient Property and Casualty segment, strong investment income and solid liquidity position provide a robust foundation for continued expansion. These strengths, combined with a favorable return on equity, highlight the company’s consistent ability to generate shareholder value. A VGM Score of A instills confidence.
With strong growth prospects, favorable estimates, and an attractive return on capital, this Zacks Rank #1 (Strong Buy) insurer presents a compelling opportunity for potential investors. You can see the complete list of today’s Zacks #1 Rank stocks here.