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Arch Capital (ACGL) Up 39% in a Year: More Room for Growth?

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Shares of Arch Capital Group Ltd. (ACGL - Free Report) have rallied 38.7% in a year compared with the industry and the Finance sector’s rally of 22% and 21.8%, respectively. The Zacks S&P 500 composite has increased 23.5% in the said time frame. With a market capitalization of $18.3 billion, the average volume of shares traded in the last three months was 1.7 million.
 

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New business opportunities, rate increases, growth in existing accounts, and solid capital position continue to drive Arch Capital, which has a solid track of beating earnings estimates in the trailing six quarters.

Return on equity in the trailing 12 months was 9.3%, better than the industry average of 5.6%. This highlights the company’s efficiency in utilizing shareholders’ fund.

Arch Capital has an impressive VGM Score of A.

Can it Retain the Momentum?

Arch Capital is a leading Specialty P&C and Mortgage Insurance business. It operates across a wide range of geographies and offers products that provide meaningful diversification and earnings stability. The Zacks Consensus Estimate for 2022 earnings is pegged at $4.38 per share, up 32.4% on 12.3% higher revenues of $10.9 billion.  The expected long-term earnings growth rate is pegged at 10%, better than the industry average of 9.7%. Arch Capital has an impressive Growth Score of A.

The Zacks Consensus Estimate for 2022 earnings has moved north by a cent in the past seven days, reflecting analyst optimism.

This insurer has been displaying a brilliant track record of net premiums written. Premiums should benefit from new business opportunities; rate increases, growth in existing accounts and growth in Australian single premium mortgage insurance.

Strategic buyouts have been helping Arch Capital expand internationally, add capabilities, enhance operations and diversify its business at attractive risk-adjusted returns.

Arch Capital has a solid balance sheet with high liquidity and low leverage, shielding it from market volatility, enabling it to retain its financial strength and flexibility required to pursue new opportunities in keeping with its long-term strategy. ACGL has $44.3 million remaining under its buyback authorization.

This Zacks Rank #2 (Buy) insurer 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 Zacks Rank #1 (Strong Buy) or Zacks Rank #2 are the best investment bets.

Other Stocks to Consider

Some other top-ranked stocks from the same space include Hallmark Financial Services (HALL - Free Report) , Fidelity National Financial (FNF - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hallmark Financial’s 2022 earnings stands at 40 cents on revenues of $363.2 million. Hallmark Financial, sporting a Zacks Rank #1, delivered a four-quarter average earnings surprise of 53.62%.

The Zacks Consensus Estimate for 2022 Fidelity National’s earnings has moved up 4.6% in the past 60 days. Fidelity National delivered a four-quarter average earnings surprise of 38.18%.

The Zacks Consensus Estimate for ProAssurance’s 2022 earnings has moved up 5.3% higher in the past 60 days. ProAssurance delivered a four-quarter average earnings surprise of 233.34%.

Shares of HALL, FNF, and PRA have rallied 25.6%, 42% and 20.7%, respectively, in a year.