NEW YORK (TheStreet) -- Shares of Mercury General Corp. (MCY - Get Report) are down -4% to $50.36 on heavy trading volume after California's fourth biggest auto insurer saw its stock cut to "underperform" from "market perform" at Keefe Bruyette & Woods, Bloomberg reports.
The firm lowered the rating on Friday after the company was up for a sixth consecutive day, moving well past its $46 price target.
The company was helped as investors shifted from commercial insurers that have struggled to raise rates among stiffening completion, Keefe Bruyette said, adding that "Mercury's dividend yield of more than 4% a year helped distinguish the company with bond yields near record low."
TheStreet Ratings team rates MERCURY GENERAL CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate MERCURY GENERAL CORP (MCY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 25.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MCY's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 1125.0% when compared to the same quarter one year prior, rising from -$9.26 million to $94.96 million.
- Net operating cash flow has significantly increased by 106.33% to $78.94 million when compared to the same quarter last year. In addition, MERCURY GENERAL CORP has also vastly surpassed the industry average cash flow growth rate of -12.08%.
- You can view the full analysis from the report here: MCY Ratings Report