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Are Investors Undervaluing Mercury General (MCY) Right Now?

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Zacks Equity Research
·2 min read
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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Mercury General (MCY). MCY is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 11.20, while its industry has an average P/E of 22.31. MCY's Forward P/E has been as high as 17.42 and as low as 10.25, with a median of 13.34, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MCY has a P/S ratio of 0.64. This compares to its industry's average P/S of 0.78.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Mercury General is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MCY feels like a great value stock at the moment.


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