Arch Capital Surges to New 52-Week High - Analyst Blog


On Dec 31, 2013, shares of Arch Capital Group Ltd. ( ACGL ) hit a new 52-week high of $59.78.

The momentum was driven by continued solid performace at the company.

With respect to earnings trend, Arch Capital delivered positive earnings surprises in the past 4 quarters, with an average beat of 32.8%. In the last reported quarter, earnings of $1.10 per share surpassed the Zacks Consensus Estimate by 27.9% and the year-ago quarter number by 26.4%.

Underwriting income rose 31.8% from the prior-year quarter with combined ratio improving 570 basis points year over year. The quarter also experienced rate increases.

Meanwhile, Arch Capital bought back $1.3 million shares in the third quarter taking the tally to $57.8 million worth shares repurchased in the first nine months of 2013. It was left with $712 million under its authorization.

Arch Capital's debt-to-capital ratio at quarter-end also remained low at 6.8%.

The Zacks Consensus estimate also witnessed an upside with estimates for 2013 increasing 3.8% to $4.13 over the last 60 days, translating into a year-over-year increase of 62.4%. The same for 2014 rose 3.9% to $3.49 over the same time frame.

The Zacks Consensus estimate for the fouth quarter is currently pegged at 89 cents, representing a potential 595% year-over-year improvement. The expected long-term growth rate for the stock is 10.6%.

However, valuation for Arch Capital looks stretched. The shares are trading at a 3.0% discount to the peer group average on a forward price-to-earnings basis and at a 15.9% premium on a price-to-book basis. Return on equity, on the other hand, is 7% lower than the peer group average. The year-to-date return from the stock of 37.6% is also lower than the Nasdaq return of 41.1%.

Arch Capital presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the property and casualty sector include Allied World Assurance Company Holdings, AG ( AWH ), AmTrust Financial Services, Inc . ( AFSI ) and Aspen Insurance Holdings Ltd . ( AHL ). All these stocks sport a Zacks Rank #1 (Strong Buy).

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

ASPEN INS HLDGS (AHL): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ACGL , AFSI , AHL , AWH

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