Over the past six months, Markel Group’s shares (currently trading at $1,842) have posted a disappointing 11.5% loss, well below the S&P 500’s 13.5% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Markel Group, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Markel Group Not Exciting?
Even with the cheaper entry price, we’re cautious about Markel Group. Here are three reasons why there are better opportunities than MKL, plus one stock we’d rather own.
1. Net Premiums Earned Hit a Plateau
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
Markel Group’s net premiums earned was flat over the last two years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Markel Group’s revenue to drop by 1.6%, a decrease from its 2.6% annualized growth for the past two years. This projection is underwhelming and implies its products and services will face some demand challenges.
Final Judgment
Markel Group isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 1.1× forward P/B (or $1,842 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d recommend looking at a top digital advertising platform riding the creator economy.
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