Arch Capital .(ACGL) ZACKS·2025-03-18 20:00Core Viewpoint - Arch Capital Group Ltd. (ACGL) is experiencing a short-term bullish trend, trading above its 50-day simple moving average, despite a significant decline from its 52-week high [1][5]. Financial Performance - As of Monday, ACGL's share price was 116.47 [1]. - Year-to-date, ACGL shares have gained 2.7%, while the industry and Finance sector have grown by 14% and 2.2%, respectively [5]. - The market capitalization of ACGL is 113.38 per share, indicating a potential upside of 19% from the current price [9]. - The Zacks Consensus Estimate for 2025 earnings has decreased by 3.1% in the past 30 days, while the estimate for 2026 has decreased by 0.8% [10]. Return on Capital - ACGL's return on equity over the trailing 12 months was 19%, significantly higher than the industry average of 8.3% [11]. - The return on invested capital (ROIC) for ACGL was 6.9%, also above the industry average of 6.4% [11]. Growth Factors - ACGL benefits from widespread operations and a strong product portfolio, providing diversification and earnings stability [12]. - The company has focused on inorganic growth through acquisitions, enhancing international expansion and diversifying its business [12]. - Solid performance in both the Insurance and Reinsurance segments, along with Mortgage Insurance, is expected to drive premium growth [13]. Cash Flow and Liquidity - ACGL has maintained a free cash flow conversion rate of over 85% in recent quarters, indicating strong earnings [14]. - The company has sufficient liquidity and low leverage, which supports growth initiatives and shields it from market volatility [13]. Earnings Projections - The Zacks Consensus Estimate for 2025 earnings is 18.9 billion, which is a 13.9% increase [15]. - For 2026, the earnings per share estimate is 20.6 billion, an 8.9% rise [15]. - The long-term earnings growth rate is projected at 2.9% [15]. Valuation - ACGL shares are trading at a price-to-book multiple of 1.79, which is higher than the industry average of 1.64 [16]. - Compared to Fidelity National Financial, Inc. and W.R. Berkley Corporation, ACGL is attractively valued, but it is considered expensive relative to CNA Financial [18]. Overall Assessment - Arch Capital has a strong product portfolio and a solid track record of premium growth, with significant growth expected in both Insurance and Reinsurance segments [19]. - The company's robust capital position reflects its financial flexibility, although premium valuation and bearish analyst sentiment warrant caution [20].