Stock Analysis

Did Markel's (NYSE:MKL) Share Price Deserve to Gain 27%?

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NYSE:MKL
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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%.

Check out our latest analysis for Markel

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).

earnings-per-share-growth
NYSE:MKL Earnings Per Share Growth March 12th 2021

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?

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.

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Rewards

  • Trading at 1.2% below our estimate of its fair value

  • Earnings are forecast to grow 53.79% per year

Risks

  • Significant insider selling over the past 3 months

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