On the four Ms, Erie Indemnity earns 99 for management and 93 for moat. The management score rests on a return on invested capital of 23.2% and a gross margin of 15.8% — figures that describe a business turning capital into profit efficiently. Debt sits at 0.00x equity.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 9.9% a year, the rate measured from the filings. The exit multiple assumed is 19.8x. That produces an intrinsic value of $138.23, a 10-CAP price of $114.05 and a payback time price of $142.85, with the value zone set at the highest of the three, $142.85. Today's price of $222.11 is 55% above it.
A wonderful business at the wrong price is still the wrong price. Erie Indemnity scores well on the business and poorly on the entry point, which is the most common shape in a long bull market.
| Price | $222.11 |
| Market cap | $10.3B |
| P/E ratio | 20.2x |
| Return on invested capital | 23.2% |
| Gross margin | 15.8% |
| Debt to equity | 0.00x |
| Free cash flow yield | 4.3% |
| Growth rate used | 9.9% |
| Growth rate measured | 10.0% |
| Exit multiple assumed | 19.8x |
| Company | Moat | Buy price |
| Kinsale Capital Group Inc (KNSL) | 95 | $700.60 |
| Assurant (AIZ) | 89 | $360.89 |
| Markel Group Inc (MKL) | 77 | $2,610.51 |
| Loews Corporation (L) | 70 | $113.81 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Erie Indemnity rather than accepting ours.