Arch Capital (ACGL) up 34% in one year: more room for growth?
This story originally appeared on Zacks
Shares of Arch Capital Group ACGL gained 34% in one year, beating the industry increase of 14.8%. The Zacks S&P 500 composite rose 12.2% during the said period. With a market capitalization of $17.8 billion, the average volume of shares traded over the past three months was 1.6 million.
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The rally was largely fueled by sharp rate hikes, new trading opportunities and ample liquidity.
The P&C insurer has a history of decent profit surprises. Net income exceeded estimates in each of the past four quarters, averaging 35.84%.
Arch Capital has a favorable VGM score of A. The VGM score helps identify stocks with the most attractive value, best growth and most promising momentum.
Will the Bull Run continue?
Estimates for 2022 and 2023 have risen nearly 2.9% and 3.1%, respectively, over the past 30 days, reflecting investor optimism.
The Zacks consensus estimate for 2022 and 2023 earnings per share is pegged at $4.51 and $5.02, indicating a year-over-year increase of 25.9% and 11, 3%, respectively.
The expected long-term earnings growth rate is set at 10%. Arch Capital has an impressive growth score of B.
This leading specialty P&C and mortgage insurer continues to post solid premium income growth across all of its segments. Increases in most lines of business, rate increases, new business opportunities and growth of existing accounts as well as a lower level of ceded premiums are expected to drive the performance of Arch Capital’s Insurance segment.
New business opportunities, growth in existing property and casualty accounts and strong rate increases are expected to drive the performance of the reinsurance segment. Technical revenues more than doubled in the fourth quarter of 2021.
Leveraging single premium mortgage insurance growth in Australia due to the acquisition of Westpac Lenders Mortgage Insurance Limited in Q3 2021 as well as increased monthly volume and single premium insurance main mortgage in the United States, the mortgage segment is well positioned for growth.
The insurer’s 12-month return on equity (ROE) was 11.4%, which was up 660 basis points year-over-year. ROE reflects its efficiency in the use of equity.
In line with strategic initiatives, Arch Capital actively pursues acquisitions to expand internationally, build capacity, drive operations and diversify the business. The acquisition of Westpac LMI and Somerset Bridge Group Limited in 2021 is expected to boost the insurer’s insurance solutions and strengthen its position as the only globally diversified insurer of mortgage credit risk.
This P&C insurer has a strong balance sheet with high liquidity and low leverage. A higher level of bonuses is likely to increase operating cash flow.
Arch Capital currently carries a Zacks rank of #2 (buy) and has an impressive value score of A. Back-tested results show that stocks with a value score of A or B, when combined with a rank Zacks No. 1 (strong buy) or 2, offer the best opportunities in value investing.
Other actions to consider
Some other top insurers include Cincinnati Financial CINF, WR Berkeley WRB and American financial group AFG. While Cincinnati Financial and WR Berkley sport a #1 Zacks Rank, American Financial wears a #2 Zacks Rank. You can see the full list of today’s Zacks #1 Rank stocks here.
Cincinnati Financial’s net income has exceeded earnings estimates in each of the past four quarters, averaging 38.48%. Over the past year, the insurer has rebounded 29.5%.
The Zacks consensus estimate for Cincinnati Financial’s earnings in 2022 and 2023 has moved north 5.5% each over the past seven days.
WR Berkley’s earnings have exceeded estimates in each of the past four quarters, with the average earnings surprise being 27.53%. Over the past year, WRB has grown 32.6%.
The Zacks consensus estimate for 2022 and 2023 revenue has moved 4.7% and 1.7% north, respectively, over the past 30 days. WR Berkley’s expected long-term earnings growth rate is set at 9%.
American Financial’s net income has exceeded earnings estimates in each of the past four quarters, averaging 39.58%. Over the past year, the insurer has rebounded 21.9%.
The Zacks consensus estimate for American Financial’s earnings in 2022 and 2023 has moved 3.3% and 8.2% north, respectively, in the past seven days.
5 shares ready to double
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WR Berkley Corporation (WRB): Free Stock Analysis Report
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Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report
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