Does Arch Capital Group Ltd.'s (NASDAQ:ACGL) 26% Earnings Growth Make It An Outperformer?
When Arch Capital Group Ltd. (NASDAQ:ACGL) announced its most recent earnings (31 December 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Arch Capital Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see ACGL has performed.
View our latest analysis for Arch Capital Group
Were ACGL's earnings stronger than its past performances and the industry?
ACGL's trailing twelve-month earnings (from 31 December 2018) of US$714m has jumped 26% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.8%, indicating the rate at which ACGL is growing has accelerated. What's enabled this growth? Let's see if it is only due to an industry uplift, or if Arch Capital Group has experienced some company-specific growth.
In terms of returns from investment, Arch Capital Group has fallen short of achieving a 20% return on equity (ROE), recording 7.0% instead. However, its return on assets (ROA) of 2.6% exceeds the US Insurance industry of 2.2%, indicating Arch Capital Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Arch Capital Group’s debt level, has increased over the past 3 years from 2.7% to 3.7%.
What does this mean?
Though Arch Capital Group's past data is helpful, it is only one aspect of my investment thesis. While Arch Capital Group has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Arch Capital Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ACGL’s future growth? Take a look at our free research report of analyst consensus for ACGL’s outlook.
Financial Health: Are ACGL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.
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