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ACGL vs. WRB: Which Stock Should Value Investors Buy Now?

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Zacks Equity Research
·2 min read
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Investors interested in stocks from the Insurance - Property and Casualty sector have probably already heard of Arch Capital Group (ACGL) and W.R. Berkley (WRB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Arch Capital Group and W.R. Berkley are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ACGL is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 27.89, while WRB has a forward P/E of 31.97. We also note that ACGL has a PEG ratio of 2.79. 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. WRB currently has a PEG ratio of 3.55.

Another notable valuation metric for ACGL is its P/B ratio of 1.13. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WRB has a P/B of 2.04.

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

ACGL is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ACGL is likely the superior value option right now.


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Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
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Zacks Investment Research