Arch Capital (ACGL) Rallies 34% in a Year: More Room to Run?

·4 min read

Arch Capital Group Ltd.’s ACGL shares have rallied 33.9% in a year against the industry’s fall of 14.5%. The Finance sector and the Zacks S&P 500 composite have declined 18.3% and 13.3%, respectively, in the same period. With a market capitalization of $24.5 billion, the average volume of shares traded in the last three months was about 2 million.

New business opportunities, rate increases, growth in existing accounts and a solid capital position continue to drive this Zacks Rank #2 (Buy) insurer’s performance. This leading specialty P&C and mortgage insurer has a decent history of delivering earnings surprises in three of the last four reported quarters.

Return on equity in the trailing 12 months was 15.9%, better than the industry average of 6.7%. This highlights the company’s efficiency in utilizing shareholders’ funds.

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It has a VGM Score of A. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum.

Can ACGL Retain the Bull Run?

The Zacks Consensus Estimate for 2023 earnings stands at $6.11, suggesting an increase of 25.5% on 21.6% higher revenues of $12.3 billion. The consensus estimate for 2024 earnings stands at $6.941, suggesting an increase of 13.7% on 10.5% higher revenues of $13.6 billion.

The expected long-term earnings growth rate is pegged at 10%. It has a Growth Score of B. The Style Score analyzes the growth prospects of a company.

New business opportunities, rate increases, growth in existing accounts and growth in the Australian single-premium mortgage insurance should Arch Capital generate increasing premiums. ACGL’s compelling product portfolio provides meaningful diversification and earnings stability, with operations spread across geographies.

ACGL has an impressive inorganic growth strategy that outlines international expansion, enhancing operations and diversifying the business at attractive risk-adjusted returns. This insurer stays focused on diversifying its Mortgage Insurance business via strategic acquisitions that complement the strength of the specialty insurance and reinsurance businesses.

Arch Capital’s solid balance sheet with high liquidity and low leverage shields it from market volatility. This insurer’s solid capital position supports financial flexibility and pursue growth initiatives.

ACGL has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Style Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.

The consensus estimate for 2023 and 2024 moved up 1.7% and 1.3% north respectively in the last 30 days reflecting analyst optimism.

Stocks to Consider

Some other top-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited AXS, Everest Re Group, Ltd. RE and Kinsale Capital Group, Inc. KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 5.70%. The Zacks Consensus Estimate for 2023 has moved 5.4% north in the past 60 days.

The Zacks Consensus Estimate for AXS 2023 and 2024 earnings per share is pegged at $7.53 and $8.42, indicating year-over-year increases of 29.6% and 11.7%, respectively. In the past year, AXS has gained 1.4%.

The Zacks Consensus Estimate for Everest Re’s 2023 and 2024 earnings per share is pegged at $46.03 and $53.25, indicating a year-over-year increase of 69.9% and 15.7%, respectively. In the past year, RE has gained 26.6%.

RE beat estimates in each of the last four quarters, the average being 18.41%.

Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. In the past year, KNSL has gained 35.9%.

The Zacks Consensus Estimate for Kinsale Capital’s 2023 and 2024 earnings per share is pegged at $9.86 and $11.85, indicating a year-over-year increase of 26.4% and 20.2%, respectively.

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Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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