Arch Capital Group (NASDAQ:ACGL) shareholders have earned a 22% CAGR over the last five years
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Arch Capital Group Ltd. (NASDAQ:ACGL) share price has soared 166% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 9.2%. But this could be related to good market conditions -- stocks in its market are up 3.8% in the last month.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Arch Capital Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Arch Capital Group managed to grow its earnings per share at 46% a year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 7.39 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Arch Capital Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Arch Capital Group shareholders have received returns of 25% over twelve months, which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 22%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Arch Capital Group better, we need to consider many other factors. Take risks, for example - Arch Capital Group has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
