The Property and Casualty (P&C) insurance market is growing rapidly due to several key factors. The rise in unpredictable catastrophic events is pushing insurers toward mergers and acquisitions for expansion. Additionally, the increasing focus on data privacy and security is driving insurers to invest in advanced technologies and cybersecurity.
Moreover, insurers are adopting innovative P&C insurance software solutions to enhance risk assessment, underwriting, claims management, and fraud detection using emerging technologies like AI, ML, data analytics, and IoT. Therefore, the property and casualty insurance market is forecasted to grow at a CAGR of 8.8% by 2029.
Against this backdrop, let’s compare two established insurance stocks to analyze which insurance stock offers better value: Mercury General Corporation (MCY) and Goosehead Insurance, Inc (GSHD).
The Case for Mercury General Corporation Stock
Valued at $2.77 billion by market cap, Mercury General Corporation (MCY) engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobiles, commercial property, mechanical protection, and umbrella insurance products.
MCY has gained 29.4% over the past year to close the last trading session at $49.98.
MCY’s forward EV/EBITDA of 3.52x is 69.3% lower than the industry average of 11.46x. Its forward EV/Sales multiple of 0.50 is 84.8% lower than the industry average of 3.28.
In the fiscal third quarter that ended on September 30, 2024, MCY’s net premiums earned increased 21.1% year-over-year and amounted to $1.32 billion. The company reported a net income of $230.86 million, as compared to a net loss of $8.23 million in the previous-year quarter. Also, its net income per share came in at $4.17 compared to a net loss per share of $0.15 in the previous-year quarter.
Street expects MCY’s revenue for the fiscal fourth quarter (ended December 2024) to increase 23.7% year-over-year to $1.40 billion. Its EPS is expected to be $0.64 in the same quarter. In addition, it surpassed the EPS estimates in each of the trailing four quarters, which is promising.
MCY’s POWR Ratings reflect bright prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MCY is ranked #8 out of 55 stocks in the Insurance - Property & Casualty industry. It has an A grade for Momentum and a B for Value. To see MCY’s Growth, Sentiment, Quality, and Stability ratings, click here.
The Case for Goosehead Insurance, Inc stock
Valued at $4.17 billion by market cap, Goosehead Insurance, Inc (GSHD) operates as a holding company for Goosehead Financial, LLC, that engages in the provision of personal lines insurance agency services in the United States.
GSHD has gained 84.3% over the past nine months to close the last trading session at $112.44.
GSHD’s forward EV/EBITDA of 33.12x is 185.7% higher than the industry average of 11.59x. Its forward EV/Sales multiple of 9.34 is 184.9% higher than the industry average of 3.28.
GSHD’s total revenues for the third quarter that ended September 30, 2024, were reported at $78.04 million. The company’s net income and earnings per share came in at $12.61 million and $0.29, respectively.
Street expects GSHD’s revenue for the first quarter ending March 2025 to increase 23.8% year-over-year to $79.82 million. However, the company’s EPS for the same quarter is expected to decline 4.6% year-over-year to $0.27. Moreover, the company surpassed consensus EPS estimates in three of the trailing four quarters.
GSHD’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to a Neutral in our proprietary rating system.
GSHD has a C grade in Stability. It is ranked #32 in the same industry.
Click here for the additional POWR Ratings for GSHD (Growth, Sentiment, Momentum, Value, and Quality).
Mercury General vs. Goosehead Insurance: Which Insurance Stock Offers Better Value?
Evolving customer expectations, technological advancements, and shifting risk landscapes are expected to drive rapid change within the property and casualty insurance industry. By adopting digital transformation, P&C insurers are expected to discover new opportunities and thrive in a constantly changing environment.
Leading insurance companies, such as MCY and GSHD, stand to capitalize on the optimistic industry outlook. However, MCY’s cheaper valuation and promising near-term outlook favor it as the better stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Insurance - Property & Casualty industry here.
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GSHD shares were trading at $110.89 per share on Monday afternoon, down $1.55 (-1.38%). Year-to-date, GSHD has gained 3.42%, versus a 3.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Mercury General vs. Goosehead Insurance: Which Insurance Stock Offers Better Value? StockNews.com
