When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Markel Corporation (NYSE:MKL) share price is up 27% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 20%.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Markel managed to grow its earnings per share at 5.8% a year. This EPS growth is reasonably close to the 5% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Markel's earnings, revenue and cash flow.
A Different Perspective
Markel shareholders gained a total return of 20% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Markel that you should be aware of before investing here.
Markel is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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What are the risks and opportunities for Markel?
Trading at 1.2% below our estimate of its fair value
Earnings are forecast to grow 53.79% per year
Significant insider selling over the past 3 months
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Markel Corporation, a diverse financial holding company, markets and underwrites specialty insurance products in the United States, Bermuda, the United Kingdom, rest of Europe, Canada, the Asia Pacific, and the Middle East.
Reasonable growth potential with mediocre balance sheet.