Do Arch Capital Group's (NASDAQ:ACGL) Earnings Warrant Your Attention?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Arch Capital Group (NASDAQ:ACGL), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Arch Capital Group
Arch Capital Group's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Arch Capital Group's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 52%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Arch Capital Group is growing revenues, and EBIT margins improved by 10.5 percentage points to 26%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Arch Capital Group's future profits.
Are Arch Capital Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$32b company like Arch Capital Group. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$905m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
Does Arch Capital Group Deserve A Spot On Your Watchlist?
Arch Capital Group's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Arch Capital Group very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Arch Capital Group , and understanding it should be part of your investment process.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
