Markel (MKL) Rises 5% YTD: Should You Buy It for Better Returns?
Markel Group’s MKL shares have gained 5.1% year to date against the industry’s decrease of 1.2%. With a market capitalization of $46 billion, the average volume of shares traded in the last three months was 0.9 million.
Niche focus, improved pricing, effective risk management, strategic buyouts and solid capital position should continue to drive this Zacks Rank #2 (Buy) insurer.
Markel has a decent history of delivering positive surprises. It beat estimates in two of the last four reported quarters, while missing in the other two.
This insurer has an impressive VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
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Can the Stock Retain the Momentum?
Earnings of the insurer increased 29% in the last five years, outperforming the industry average of 10.6%.
The Zacks Consensus Estimate for 2023 earnings is pegged at $78.32 per share, implying an increase of 16.9% from the year-ago reported figure on 9.2% higher revenues of $14.5 billion. The consensus estimate for 2024 earnings is pegged at $87.88, implying an increase of 12.2% from the year-ago reported figure on 10.1% higher revenues of $15.9 billion.
Markel has a Growth Score of B. This style score analyses the growth prospect of a company.
New business volume, strong policy retention levels, continued increases in rates and expanded product offerings should help MKL continue to deliver better premiums. MKL’s gross premiums increased at a two-year CAGR of 19.4%.
Markel looks to double the size of its insurance operations and thus targets $10 billion of annual insurance premiums in five years. This should lead to $1 billion of annual underwriting profit. The company expects to achieve this goal primarily through organic growth of its existing operations. We estimate operating revenues to grow at a three-year CAGR of (2022-2025) 13.4%.
Investment income has been rising over the past many years. A higher interest rate is likely to boost investment results. Markel expects to benefit gradually from higher interest rates within its fixed maturity portfolio through recent purchases at higher yield rates. It believes the impact to become more meaningful in future periods as lower-yielding securities mature and are replaced by higher-yielding securities. We estimate a 42.7% increase in net investment income in 2023.
Through Markel Ventures, MKL has been investing in the ownership of the best asset management firms. The insurer has been pursuing acquisitions to achieve profitable growth in insurance operations and to create additional value on a diversified basis in Markel Ventures operations.
Markel has a solid balance sheet. The insurer engages in share buybacks on the strength of its solid capital position.
Attractive Valuation
The company’s shares are trading at a forward price-to-earnings multiple of 16.6, lower than the industry average of 20.5.
It has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offers better returns.
Before valuation expands, it is wise to take a position in the stock.
Other Stocks to Consider
Some other top-ranked stocks from the same industry are Honeywell International HON, ITT ITT and Star Equity STRR.
The Zacks Consensus Estimate for HON’s 2023 and 2024 earnings indicates a year-over-year increase of 4.6% and 9.6%, respectively. Honeywell delivered a four-quarter average earnings surprise of 4.02%. It carries a Zacks Rank #2.
The consensus estimate for 2023 and 2024 earnings has moved up by a cent each in the past 30 days. Shares of HON have gained 47.5% year to date.
The Zacks Consensus Estimate for ITT’s 2023 and 2024 earnings indicates a year-over-year increase of 9.7% and 11.6%, respectively. ITT delivered a four-quarter average earnings surprise of 3.54%.
The consensus estimate for 2023 and 2024 earnings has moved up by 0.2% and 0.7%, respectively, in the past 60 days. Shares of ITT have gained 9.2% year to date.
The Zacks Consensus Estimate for STRR’s 2023 earnings indicates a year-over-year increase of 5.3%. Star Equity delivered a four-quarter average earnings surprise of 371.43%. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for 2023 earnings has moved up 300% in the past 60 days. Shares of STRR have gained 2% year to date.
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