Mercury General (MCY) AI Stock Analysis

• Market Cap: $4.75B
• Dividend Yield: 1.34%
• Average Volume (3M): 292.80K
• Price to Earnings (P/E): 8.8
• Beta (1Y): 0.71
• Revenue Growth: 6.18%
• EPS Growth: -21.28%
• Country: US
• Employees: 4,200
• Sector: Financial
• Sector Strength: 70
• Industry: Insurance - Property & Casualty
• EPS (TTM): 3.66
• Shares Outstanding: 55,388,626
• 10 Day Avg. Volume: 411,474
• 30 Day Avg. Volume: 292,802
• PEG Ratio: 0.62
• Price to Book (P/B): 2.16
• Price to Sales (P/S): 0.87
• P/FCF Ratio: 5.06
• Enterprise Value/Market Cap: 0.90
• Enterprise Value/Revenue: 0.72
• Enterprise Value/Gross Profit: 2.12
• Enterprise Value/Ebitda: 5.60
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 9
• Revenue Forecast (FY): $6.06B

• Rating: 74 Outperform
• Price Target: $98.00 ▲(5.24% Upside)
• Action: Reiterated Date: 02/19/26
• Date: Action: Reiterated 02/19/26

MCY scores well primarily on financial performance, led by very strong recent cash generation, improved profitability, and conservative leverage. Valuation is also supportive with a low P/E and a modest dividend. The main drag is technicals, with the stock trading below key short-term moving averages and momentum indicators suggesting limited near-term upside.

Positive Factors

Cash generation

Sustained, large operating and free cash flow boosts financial flexibility for a P&C insurer. Strong FCF that closely tracks net income supports reserve funding, reinsurance, capital returns, and underwriting investments without frequent external financing, improving resilience across cycles.

Conservative leverage / stronger equity

Lower leverage and materially higher equity provide a meaningful capital buffer against underwriting volatility common in P&C. This conservative balance-sheet posture supports rating stability, gives flexibility for reserve builds or rate actions, and allows strategic capital deployment without stressing liquidity.

Revenue and profit recovery

The company has returned to consistent profitability after a severe underwriting loss, with improving revenue trends and solid net margins. Recovery signals better pricing, underwriting discipline, and product mix execution in personal lines, supporting sustainable earnings and return on equity in coming quarters.

Negative Factors

Earnings volatility / cycle sensitivity

As a personal-lines P&C insurer, earnings and returns have shown sharp swings tied to loss-cost cycles and reserve adjustments. Such volatility can erode book value, complicate capital planning, and force procyclical underwriting or capital conservation, reducing predictability for stakeholders.

Limited recent margin visibility

Gaps in consistent margin metrics make it harder to judge whether recent profitability is durable. Without clear, repeatable underwriting margin trends, forecasting reserve adequacy and pricing responsiveness is more uncertain, increasing the risk of surprise underwriting losses or conservative capital reactions.

Cash-flow variability historically

Historical swings in operating cash flow driven by reserving and working-capital dynamics show cash generation can be episodic. Even with strong recent FCF, variability limits confidence in consistent dividends or buybacks and can force precautionary capital retention in adverse underwriting periods.

Mercury General Business Overview & Revenue Model

Company Description

Mercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. Its automobile insurance products include collision, property damage, bodily injury, comprehensive, personal injury protection, underinsured and uninsured motorist, and other hazards; and homeowners insurance products comprise dwelling, liability, personal property, fire, and other hazards. The company sells its policies through a network of independent agents and insurance agencies, as well as directly through internet sales portals in Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. Mercury General Corporation was founded in 1961 and is headquartered in Los Angeles, California.

How the Company Makes Money

Mercury General generates revenue primarily through the sale of insurance premiums. The company collects premiums from policyholders in exchange for providing coverage against various risks associated with automobile and property ownership. Key revenue streams include the underwriting of auto and home insurance policies, where the company assesses risk and determines premium pricing based on factors such as driving records, property values, and claims history. Additionally, Mercury invests the premiums collected in various financial instruments, generating investment income. The company's effective use of independent agents to distribute its products expands its market reach, and its focus on customer service helps retain policyholders, contributing to sustained revenue growth.

Mercury General Financial Statement Overview

Summary

Strong cash generation and improved profitability drive the score: operating cash flow and free cash flow rose sharply through 2025, leverage is conservative with strengthening equity, and margins recovered materially from the 2022 loss to solid profitability. The main offset is meaningful cycle-driven volatility in earnings/returns (important for P&C insurers) and some limited recent-period margin visibility.

Income Statement

Revenue has expanded meaningfully over the last several years, with the latest annual revenue up ~2.9% versus the prior year. Profitability has improved sharply from the 2022 loss (net margin -14.1%) to solid profits in 2023–2025, with the latest net margin around 9.0%. The main weakness is earnings volatility across the cycle (notably the 2022 drawdown), and margin metrics are not consistently available in the most recent period, limiting visibility into the underlying operating trend.

Balance Sheet

Leverage looks conservative for the period shown: debt-to-equity improved to ~0.24 in the latest year (down from ~0.38 in 2023), and equity has grown strongly (about $1.55B in 2023 to about $2.42B in 2025). Returns on equity are strong in the last two years (~22–24%), reflecting the earnings rebound. Key risk is that book value and returns have proven sensitive to profitability swings (e.g., negative return on equity in 2022), which is important for a P&C insurer.

Cash Flow

Cash generation is a clear strength: operating cash flow is robust and rising (about $453M in 2023 to about $1.09B in 2025), and free cash flow is consistently high (about $1.03B in 2025). Free cash flow closely tracks reported earnings (free cash flow about 95% of net income in 2025), suggesting good earnings quality. The main caution is variability in cash flow over time (notably much lower operating cash flow in 2022–2023 versus 2024–2025), which can occur in insurance due to working-capital and reserving dynamics.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.99B	5.48B	4.63B	3.64B	3.99B
Gross Profit	2.03B	932.86M	403.25M	-373.76M	599.82M
EBITDA	767.26M	679.14M	195.84M	-571.09M	395.48M
Net Income	541.09M	467.95M	96.34M	-512.67M	247.94M
Balance Sheet
Total Assets	9.56B	8.31B	7.10B	6.51B	6.77B
Cash, Cash Equivalents and Short-Term Investments	1.32B	1.00B	729.39M	412.71M	475.68M
Total Debt	594.35M	587.71M	587.96M	420.25M	407.51M
Total Liabilities	7.14B	6.36B	5.56B	4.99B	4.63B
Stockholders Equity	2.42B	1.95B	1.55B	1.52B	2.14B
Cash Flow
Free Cash Flow	1.03B	990.98M	416.18M	317.08M	460.14M
Operating Cash Flow	1.09B	1.04B	452.99M	352.59M	501.58M
Investing Cash Flow	-420.16M	-796.66M	-295.44M	-316.38M	-373.67M
Financing Cash Flow	-71.72M	-71.11M	103.58M	-81.99M	-140.84M

Mercury General Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 93.12
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCY, the sentiment is Positive. The current price of 93.12 is above the 20-day moving average (MA) of 90.30, above the 50-day MA of 90.67, and above the 200-day MA of 78.87, indicating a neutral trend. The MACD of -0.65 indicates Positive momentum. The RSI at 50.45 is Neutral, neither overbought nor oversold. The STOCH value of 32.32 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MCY.

Mercury General Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HCI	79 Outperform	$2.03B	10.00	31.94%	0.82%	8.71%	17.26%
SIGI	77 Outperform	$4.96B	11.03	13.86%	1.85%	10.98%	74.87%
RLI	75 Outperform	$5.62B	14.00	24.44%	4.05%	3.72%	-16.23%
MCY	74 Outperform	$4.75B	8.78	24.80%	1.34%	6.18%	-21.28%
WTM	73 Outperform	$5.51B	5.17	2.95%	0.05%	-4.24%	-78.10%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
KMPR	56 Neutral	$1.83B	13.65	9.03%	3.15%	4.51%	-8.29%