Arch Capital (ACGL) Up 44.1% in a Year: Will the Rally Last?
Arch Capital Group Ltd.’s ACGL shares have moved up 44.1% in the past year, outperforming the industry’s growth of 10.9%. The Finance sector and the Zacks S&P 500 composite have risen 0.2% and 11.5%, respectively, in the same period. With a market capitalization of $31.4 billion, the average volume of shares traded in the last three months was 1.8 million.
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The rally was largely driven by favorable estimates, business opportunities, rate increases, growth in existing accounts and a solid capital position.
This Zacks Rank #2 (Buy) property and casualty insurer has a decent history of delivering earnings surprises in each of the last four quarters, the average being 35.16%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings has moved 9.8% and 2.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.
Can ACGL Retain the Momentum?
The Zacks Consensus Estimate for 2023 earnings is pegged at $7.67 per share, suggesting a year-over-year increase of 57.4% on 32.7% higher revenues of $13.47 billion. The consensus estimate for 2024 earnings is pegged at $7.71 per share, indicating a year-over-year increase of 0.5% on 14.6% higher revenues of $15.45 billion.
Arch Capital has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best opportunities in the value investing space.
ACGL’s premium should continue to gain from new business opportunities, rate increases, growth in existing accounts and higher Australian single-premium mortgage insurance. With operations spread across geographies, a compelling product portfolio provides meaningful diversification and earnings stability to the insurer.
Arch Capital’s impressive inorganic growth encompasses international expansion, operation enhancements and business diversification at attractive risk-adjusted returns. The diversification of its Mortgage Insurance business via strategic acquisitions complements the strength of the specialty insurance and reinsurance businesses.
This leading specialty P&C and mortgage insurer has been witnessing substantial improvement in net investment income over the last few years. In the first nine months of 2023, net investment income more than doubled year over year to $710 million. Going forward with new money rates in fixed income portfolio in the range of 5.25% to 5.5% and a growing base of invested assets, the company expects to deliver an increasing level of investment income to help boost the bottom line.
Arch Capital’s solid balance sheet, with high liquidity and low leverage, shields it from market volatility and supports growth initiatives.
Annualized operating return on average common equity expanded 1,110 basis points to 22.7% in the first nine months of 2023. This highlights the company’s efficiency in utilizing shareholders’ funds.
Arch Capital has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Cincinnati Financial Corporation CINF, Mercury General Corporation MCY and W.R. Berkley Corporation WRB. While Cincinnati Financial and Mercury General sport a Zacks Rank #1, W.R. Berkley carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cincinnati Financial surpassed earnings in three of the last four quarters and missed in one, the average being 38.33%. In the past year, the insurer has lost 1.6%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings has moved 2.6% and 0.3% north, respectively, in the past seven days, reflecting analysts’ optimism.
Mercury General beat estimates in two of the last four quarters and missed in the other two, the average being 2,833.05%. In the past year, the insurer has gained 3.5%.
The Zacks Consensus Estimate for MCY’s 2023 and 2024 earnings per share indicates a year-over-year increase of 65.2% and 343.7%, respectively.
W.R. Berkley beat estimates in three of the last four quarters and missed in one, the average being 4.35%. In the past year, the insurer has lost 7.7%.
The Zacks Consensus Estimate for WRB’s 2023 and 2024 earnings per share is pegged at $4.74 and $5.70, indicating a year-over-year increase of 8.2% and 20.1%, respectively.
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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Mercury General Corporation (MCY) : Free Stock Analysis Report
