U.S. Markets close in 3 hrs 22 mins

ACGL vs. SIGI: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in stocks from the Insurance - Property and Casualty sector have probably already heard of Arch Capital Group (ACGL) and Selective Insurance (SIGI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, both Arch Capital Group and Selective Insurance are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

ACGL currently has a forward P/E ratio of 13.84, while SIGI has a forward P/E of 18.18. We also note that ACGL has a PEG ratio of 1.38. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SIGI currently has a PEG ratio of 1.72.

Another notable valuation metric for ACGL is its P/B ratio of 1.45. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SIGI has a P/B of 2.28.

These metrics, and several others, help ACGL earn a Value grade of B, while SIGI has been given a Value grade of C.

Both ACGL and SIGI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ACGL is the superior value option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
 
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.