Should Value Investors Buy Mercury General (MCY) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 stock to keep an eye on is Mercury General (MCY). MCY is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 12.08, which compares to its industry's average of 25.77. Over the last 12 months, MCY's Forward P/E has been as high as 163.64 and as low as 6.83, with a median of 13.27.

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 0.81. This compares to its industry's average P/S of 1.3.

Finally, we should also recognize that MCY has a P/CF ratio of 9.50. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. MCY's current P/CF looks attractive when compared to its industry's average P/CF of 11.45. Over the past year, MCY's P/CF has been as high as 10.18 and as low as 4.83, with a median of 7.64.

These are only a few of the key metrics included in Mercury General's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MCY looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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