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Arch Capital (ACGL) Rallies 32% YTD: More Room for Growth?
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Shares of Arch Capital Group Ltd. (ACGL - Free Report) have rallied 31.6% year to date, outperforming the industry’s growth of 20.1%, the Finance sector’s rise of 8.4% and the Zacks S&P 500 composite’s increase of 14.1%. With a market capitalization of $36.7 billion, the average volume of shares traded in the last three months was 1.6 million.
New business opportunities, rate improvement, growth in existing accounts and a solid capital position drive this Zacks Rank #2 (Buy) insurer, which has the potential to retain the momentum ahead.
The company has a VGM Score of B. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum.
The insurer has a solid history of delivering earnings surprises in the last nine reported quarters. Earnings of this leading specialty P&C and mortgage insurer increased 32.3% in the last five years, better than the industry average of 10.5%.
Return on equity in the trailing 12 months was 21.4%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.5%, better than the industry average of 6.1%.
Image Source: Zacks Investment Research
Can ACGL Retain the Momentum?
Widespread operations coupled with a compelling product portfolio provide meaningful diversification and earnings stability to ACGL.
The insurer, through acquisitions, continues to make international expansion, enhance operations and diversify business 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. ACGL’s pending buyout of Allianz’s U.S. MidCorp and Entertainment insurance business reflects its commitment to expanding its footprint in the middle-market property and casualty segment.
A growing base of invested assets driven by improving cash flows in an improved rate environment should drive investment income.
Sufficient liquidity coupled with low leverage has helped ACGL strengthen its balance. This also shields it from market volatility and supports growth initiatives.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The Zacks Consensus Estimate for 2024 earnings is pegged at $9.00 per share, suggesting an increase of 6.5% on 14.6% higher revenues of $15.5 billion. The consensus estimate for 2025 earnings per share is $9.23, suggesting an increase of 2.5% on 9.6% higher revenues of $16.9 billion.
The long-term earnings growth rate is expected to be 6.1%. We expect the 2026 bottom line to witness a three-year CAGR of 4.2%. The company has a Growth Score of B.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1.2% and 0.4% north, respectively, in the past seven days, reflecting analyst optimism.
Heritage Insurance earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 49.15%. Year to date, HRTG has rallied 87.6%.
The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings implies 10.3% and 18.1% year-over-year growth, respectively.
NMI Holdings earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 10.15%. Year to date, NMIH’s stock has surged 26.5%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings indicates 15.6% and 5.6% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 5.8%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 457.1% and 49.2% year-over-year growth, respectively.
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Arch Capital (ACGL) Rallies 32% YTD: More Room for Growth?
Shares of Arch Capital Group Ltd. (ACGL - Free Report) have rallied 31.6% year to date, outperforming the industry’s growth of 20.1%, the Finance sector’s rise of 8.4% and the Zacks S&P 500 composite’s increase of 14.1%. With a market capitalization of $36.7 billion, the average volume of shares traded in the last three months was 1.6 million.
New business opportunities, rate improvement, growth in existing accounts and a solid capital position drive this Zacks Rank #2 (Buy) insurer, which has the potential to retain the momentum ahead.
The company has a VGM Score of B. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum.
The insurer has a solid history of delivering earnings surprises in the last nine reported quarters. Earnings of this leading specialty P&C and mortgage insurer increased 32.3% in the last five years, better than the industry average of 10.5%.
Return on equity in the trailing 12 months was 21.4%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.5%, better than the industry average of 6.1%.
Image Source: Zacks Investment Research
Can ACGL Retain the Momentum?
Widespread operations coupled with a compelling product portfolio provide meaningful diversification and earnings stability to ACGL.
The insurer, through acquisitions, continues to make international expansion, enhance operations and diversify business 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. ACGL’s pending buyout of Allianz’s U.S. MidCorp and Entertainment insurance business reflects its commitment to expanding its footprint in the middle-market property and casualty segment.
A growing base of invested assets driven by improving cash flows in an improved rate environment should drive investment income.
Sufficient liquidity coupled with low leverage has helped ACGL strengthen its balance. This also shields it from market volatility and supports growth initiatives.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The Zacks Consensus Estimate for 2024 earnings is pegged at $9.00 per share, suggesting an increase of 6.5% on 14.6% higher revenues of $15.5 billion. The consensus estimate for 2025 earnings per share is $9.23, suggesting an increase of 2.5% on 9.6% higher revenues of $16.9 billion.
The long-term earnings growth rate is expected to be 6.1%. We expect the 2026 bottom line to witness a three-year CAGR of 4.2%. The company has a Growth Score of B.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1.2% and 0.4% north, respectively, in the past seven days, reflecting analyst optimism.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Heritage Insurance (HRTG - Free Report) , NMI Holdings (NMIH - Free Report) and ProAssurance (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heritage Insurance earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 49.15%. Year to date, HRTG has rallied 87.6%.
The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings implies 10.3% and 18.1% year-over-year growth, respectively.
NMI Holdings earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 10.15%. Year to date, NMIH’s stock has surged 26.5%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings indicates 15.6% and 5.6% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 5.8%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 457.1% and 49.2% year-over-year growth, respectively.