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Shrugging off initial setbacks, the broader U.S. equity markets witnessed a steady uptrend over the past couple of trading days and hit record-high territory in a month historically known as the worst for the benchmark indices. The stock market rally was driven by broad-based expectations of an interest rate cut by the Federal Reserve.
However, despite a half-percentage-point rate cut to a range of 4.75% to 5.00%, akin to the expectations — the first rate cut in four years — the markets failed to hold on to the gains and fell off the peak after a steep ascent. The volatility was induced by fears that the Fed was trying to get ahead of potential economic weakness by skipping its traditional quarter-point cut. However, the central bank tried its best to assuage the concerns. Fed Chair Jerome Powell later clarified that the outsized interest rate cut was driven by cooling inflation, which was moving toward a sustainable level of 2%.
As investors employ a wait-and-see approach in a classic example of “backing and filling” in the market, they can benefit from “cash cow” stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return. Upbound Group, Inc. UPBD, The Hartford Financial Services Group, Inc. HIG, Arch Capital Group Ltd. ACGL, PulteGroup, Inc. PHM and Banco de Chile BCH are some of the stocks with high ROE to profit from.
ROE: A Key Metric
ROE = Net Income/Shareholders’ Equity
ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies that diligently deploy cash for higher returns.
Moreover, ROE is often used to compare the profitability of a company with other firms in the industry — the higher, the better. It measures how well a company is multiplying its profits without investing new equity capital and portrays management’s efficiency in rewarding shareholders with attractive risk-adjusted returns.
Screening Parameters
In order to shortlist stocks that are cash-rich with high ROE, we have added Cash Flow greater than $1 billion and ROE greater than X-Industry as our primary screening parameters. In addition, we have taken a few other criteria into consideration to arrive at a winning strategy.
Price/Cash Flow lesser than X-Industry: This metric measures how much investors pay for $1 of free cash flow. A lower ratio indicates that investors need to pay less for a better cash flow-generating stock.
Return on Assets (ROA) greater than X-Industry: This metric determines how much profit a company earns for every dollar of asset, which includes cash, accounts receivable, property, equipment, inventory and furniture. The higher the ROA, the better it is for the company.
5-Year EPS Historical Growth greater than X-Industry: This criterion indicates that continued earnings momentum has translated into solid cash strength.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.
Here are five of the eight stocks that qualified the screening:
Upbound Group: Headquartered in Plano, TX, Upbound Group (formerly Rent-A-Center, Inc.) is a leading lease-to-own provider with operations in the United States, Puerto Rico and Mexico. The company provides services to a large portion of consumers by providing them access and the opportunity to obtain ownership of high-quality, durable products under a flexible lease purchase agreement with no long-term debt obligation.
The company delivered a trailing four-quarter earnings surprise of 3.8% on average. It has a VGM Score of B. Upbound Group carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hartford Financial: Headquartered in Hartford, CT, Hartford Financial is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance and mutual funds in the United States. It sells various innovative products through multiple distribution channels to individuals and businesses and is considered a leading property and casualty and employee group benefits insurer.
It has a long-term earnings growth expectation of 12.4% and delivered a trailing four-quarter earnings surprise of 13.1%, on average. Hartford Financial carries a Zacks Rank #2.
Arch Capital: Headquartered in Pembroke, Bermuda, Arch Capital offers insurance, reinsurance and mortgage insurance across the world. It provides a wide range of products and services, which include primary and excess casualty coverages, professional indemnity, workers’ compensation and umbrella liability and employers’ liability insurance coverages. The company offers a full range of property, casualty and mortgage insurance and reinsurance lines while maintaining a focus on writing specialty lines of insurance and reinsurance.
It has a long-term earnings growth expectation of 6.1% and delivered a trailing four-quarter earnings surprise of 28.9%, on average. It has a VGM Score of B. Arch Capital carries a Zacks Rank #2.
PulteGroup: Based in Atlanta, GA, PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments – Homebuilding and Financial Services. The company engages in maintaining a 50/50 balance between build-to-order and spec sales, enabling it to meet immediate demand with spec homes while accommodating buyers who prefer to customize their homes with build-to-order options.
The company has a long-term earnings growth expectation of 19% and delivered a trailing four-quarter earnings surprise of 10%, on average. It has a VGM Score of B. PulteGroup carries a Zacks Rank #2.
Banco de Chile: Headquartered in Santiago, Chile, Banco de Chile provides various banking services to customers in the Latin American country. These include deposit accounts, loans, payment-related cards and insurance solutions. The company also offers services such as cash management, treasury, financial advisory, trade finance, leasing, factoring, payment, payroll, collection, mutual fund management, securities brokerage, currency trading, investment management, collection, securitization and capital markets services.
It delivered a trailing four-quarter earnings surprise of 6.1%, on average. Banco de Chile carries a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Investment Research
Shares of Radian Group RDN closed at $35.15 on Tuesday, near its 52-week high of $37.86. Improving mortgage insurance portfolio, declining claims, a well-performing homegenius segment, a solid capital position and effective capital deployment are driving the price higher.
Radian Group continued to benefit from positive credit performance in the mortgage insurance portfolio. With strong persistency rates and the current positive industry pricing environment, RDN expects in-force portfolio premium yield to remain stable.
Shares have gained 23.2% year to date, outperforming the industry’s increase of 16.4%, the Finance sector’s rise of 14.3% and the Zacks S&P 500 composite’s increase of 18.1% in the said time frame.
RDN Outperforms Industry, Sector, S&P 500 YTD
RDN shares are trading well above the 50-day moving average, indicating a bullish trend.
RDN’s Northbound Estimate Revision Instills Confidence
Both the analysts covering the stock raised estimates for the current and next year. The Zacks Consensus Estimate for RDN’s 2024 and 2025 earnings has moved 6.5% and 1.7% north, respectively, in the past 60 days, reflecting analyst optimism.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 8.2%, better than the industry average of 2.4%, reflecting RDN’s efficiency in utilizing funds to generate income.
Factors Acting in Favor of Radian
The company has intensified its focus on the core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream.
New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
RDN has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
The insurer has been strengthening its capital position with capital contribution, reinsurance transaction and cash position. This, in turn, aids the insurer to engage in wealth distribution.
RDN Shares Are Undervalued
RDN shares are trading at a price-to-book multiple of 1.18, lower than the industry average of 2.60. Its pricing at a discount to the industry average gives a better entry point to investors.
Shares of other insurers like MGIC Investment Corporation MTG are trading at a multiple lower than the industry average, while that of Arch Capital Group ACGL are trading at a multiple higher than the industry average.
Parting Thoughts
Radian expects that the private mortgage insurance market will be approximately $300 billion in 2024, consistent with the prior year. It expects a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in large and valuable insurance in-force portfolio.
The 9% increase in quarterly dividend in the first quarter of 2024 marks the fifth consecutive year in which RDN has increased the quarterly dividend, with a total increase of 96% over the past four years. Its current dividend yield of 2.7% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.
Given its attractive valuation, this Zacks Rank #2 (Buy) mortgage insurer is a strong contender for addition to one’s portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
Shares of MGIC Investment Corporation MTG closed at $25.30 on Tuesday, near its 52-week high of $25.93. Solid insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and prudent capital deployment are driving the price higher.
Given the strong purchase market and potential share gains from the Federal Housing Administration, MGIC Investment expects strong premium writing. Increased persistency rate should continue to boost insurance in force.
Shares have gained 31.2% year to date, outperforming the industry’s increase of 15.8%, the Finance sector’s rise of 14.1% and the Zacks S&P 500 composite’s increase of 18.1% in the said time frame.
MTG Outperforms Industry, Sector, S&P 500 YTD
MTG shares are trading well above the 50-day moving average, indicating a bullish trend.
MTG’s Northbound Estimate Revision Instills Confidence
All three analysts covering the stock raised estimates for the current and next year. The Zacks Consensus Estimate for MTG’s 2024 and 2025 earnings has moved 2.2% and 1.5% north, respectively, in the past 30 days, reflecting analyst optimism.
MTG’s Return on Capital
Return on invested capital in the trailing 12 months was 11.4%, better than the industry average of 2.4%, reflecting MTG’s efficiency in utilizing funds to generate income.
Factors Acting in Favor of MGIC Investment
The insurance-in-force portfolio is set to grow, banking on new business and increasing annual persistency. A higher level of new and existing home sales, an increased percentage of homes purchased for cash and an improved level of refinance activity in an improving housing market should help this largest private mortgage insurer in the United States grow.
MTG has been witnessing a declining pattern of claim filings. A decline in loss and claims will strengthen the balance sheet and improve the insurer’s financial profile.
The insurer is improving its capital position with capital contribution, reinsurance transactions and cash position. Both leverage and times interest earned ratios have been improving.
A solid capital position supports MTG in wealth distribution. The company currently has $724 million remaining in its authorization kitty through December 2026. Its share repurchase activity reflects continued strong mortgage credit performance.
MTG’s Optimistic Growth Outlook
The Zacks Consensus Estimate for 2024 earnings is pegged at $2.76 per share, suggesting an increase of 9.1% on 4.7% higher revenues of $1.2 billion. The consensus estimate for 2025 earnings per share is $2.76, flat year over year on 4.6% higher revenues of $1.3 billion. The long-term expected earnings growth rate is 6.8%.
MTG Shares Are Undervalued
MTG shares are trading at a price-to-book multiple of 1.28, lower than the industry average of 2.60. Its pricing, at a discount to the industry average, gives a better entry point to investors.
Shares of other insurers like Radian Group RDN are trading at a multiple lower than the industry average, while that of Arch Capital Group ACGL are trading at a multiple higher than the industry average.
Parting Thoughts
MTG has been seeing improving housing market fundamentals, such as household formations and home sales and the current capital status. Higher premiums, outstanding credit quality and new business will continue to induce growth for MCIG.
The latest 13% increase in its quarterly dividend to 13 cents per share marked four straight years of dividend increases at a compound annual growth rate of 21%. Its current dividend yield is 2.1%.
Given its attractive valuation and upbeat prospects, this Zacks Rank #1 (Strong Buy) mortgage insurer is a strong contender for addition to one’s portfolio.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks Investment Research
Have you been paying attention to shares of Arch Capital Group (ACGL)? Shares have been on the move with the stock up 10.9% over the past month. The stock hit a new 52-week high of $114.69 in the previous session. Arch Capital Group has gained 53.4% since the start of the year compared to the 16.6% move for the Zacks Finance sector and the 27.8% return for the Zacks Insurance - Property and Casualty industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2024, Arch Capital reported EPS of $2.57 versus consensus estimate of $2.17 while it beat the consensus revenue estimate by 0.66%.
For the current fiscal year, Arch Capital is expected to post earnings of $9.01 per share on $15.56 billion in revenues. This represents a 6.63% change in EPS on a 15.33% change in revenues. For the next fiscal year, the company is expected to earn $9.23 per share on $16.98 billion in revenues. This represents a year-over-year change of 2.46% and 9.16%, respectively.
Valuation Metrics
Arch Capital may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Arch Capital has a Value Score of B. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 12.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 12.8X versus its peer group's average of 13.2X. Additionally, the stock has a PEG ratio of 2.06. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Arch Capital currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Arch Capital passes the test. Thus, it seems as though Arch Capital shares could still be poised for more gains ahead.
How Does ACGL Stack Up to the Competition?
Shares of ACGL have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is W.R. Berkley Corporation (WRB). WRB has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of A.
Earnings were strong last quarter. W.R. Berkley Corporation beat our consensus estimate by 13.04%, and for the current fiscal year, WRB is expected to post earnings of $4.03 per share on revenue of $13.55 billion.
Shares of W.R. Berkley Corporation have gained 1.4% over the past month, and currently trade at a forward P/E of 14.42X and a P/CF of 16.99X.
The Insurance - Property and Casualty industry is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ACGL and WRB, even beyond their own solid fundamental situation.
Zacks Investment Research
For Immediate Release
Chicago, IL –September 18, 2024 – Zacks Equity Research shares Erie Indemnity ERIE, as the Bull of the Day and Dollar Tree DLTR, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Canadian Imperial Bank of Commerce CM, Barclays PLC BCS and Arch Capital Group Ltd. ACGL.
Here is a synopsis of all five stocks:
Bull of the Day:
Erie Indemnity, a current Zacks Rank #1 (Strong Buy), issues, renews, and underwrites insurance products for personal liability, property, boat, recreational vehicles, home, flood, and auto. The company’s earnings outlook is notably bullish across all timeframes.
In addition to favorable earnings estimate revisions, the stock resides in the Zacks Insurance – Brokerage industry, currently ranked in the top 4% of all Zacks industries. Let’s take a closer look at how the company currently stacks up.
ERIE Reports Strong Growth
Since becoming a Zacks Rank #1 (Strong Buy) on July 30th, ERIE shares have gained nearly 20%, widely outperforming relative to the S&P 500. Favorable quarterly results have helped the stock all year long in general, up 60% on a YTD basis.
Income-focused investors could find ERIE shares attractive, with the company currently sporting a shareholder-friendly 7.4% five-year annualized dividend growth rate paired with a sustainable payout ratio sitting at 50% of its earnings.
While the current yield has been pushed down by strong share performance, the company’s dividend growth can’t be overlooked.
Shares got a nice boost following its latest set of quarterly results, with the company posting 40% earnings growth on 18% higher sales. Earnings results have regularly exceeded our expectations, with the company beating the Zacks Consensus EPS estimate by an average of 12% across its last four releases.
Bottom Line
Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.
The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Erie Indemnity would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
Dollar Tree, a discount retailer, offers a wide range of quality everyday general merchandise in many categories, including housewares, seasonal goods, candy, food, toys, health and beauty care, and many other consumer items.
Analysts have taken a bearish stance on the stock’s outlook, lowering their earnings expectations across the board and pushing it into an unfavorable Zacks Rank #5 (Strong Sell).
In addition, the company is in the Zacks Retail – Discount Stores industry, which is currently ranked in the bottom 25% of all Zacks industries. Let’s take a closer look at the company.
DLTR Faces Post-Earnings Pressure
DLTR’s recent quarterly results haven’t been positive, with the company falling short of the Zacks Consensus EPS estimate by an average of 11% across its last four releases. Concerning its latest print, Dollar Tree fell short of both consensus earnings and revenue expectations, with EPS falling nearly 30% alongside a modest 0.7% sales increase.
Down nearly 50% in 2024, shares have regularly faced post-earnings selling pressure.
The company trimmed its current-year sales guidance following its latest release, helping explain the post-earnings share plunge. Analysts have revised their sales expectations accordingly as well, with the $30.1 billion expected for its current fiscal year (FY24) down 4% over the last year and reflecting a marginal 0.3% Y/Y climb.
A key piece of the Dollar Tree story lies in their consumer demographics. As a discount retailer, the company attracts many lower-income consumers looking for value, but the company is also more susceptible to economic slowdowns when these types of consumers get pinched the most.
Bottom Line
Narrowed guidance and weak quarterly results paint a challenging picture for the discount retailer’s shares in the near term.
Dollar Tree is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.
Additional content:
3 Financial Stocks to Buy in the Current Environment
To control inflation, the Fed raised interest rates for 10 straight policy meetings before finally opting for a rate pause in June 2023. It barely raised rates till the end of 2023 and promised at least three rate cuts in 2024. However, it is only in September of this year that we are finally going to see the first slashing of rates.
Fed Chair Jerome Powell has continued to suggest that he is fairly certain of rate cuts this year, but the Fed would embark on that journey only after reviewing further data. From his recent remarks, as well as comments made by other Fed officials, it is now amply evident that the inflation level is at the mark that the Fed wants it to be at. That also indicates that we are going to witness the much awaited rate cuts from September itself. In fact, it is the extent of the rate cuts that is currently being debated.
While a September rate cut is almost a certainty, the Fed has resisted committing to further cuts as of now. Yet, with both consumer and producer-side inflation coming in line with expectations, investor mood has been upbeat about the Fed bringing down rates more than expected earlier. Per CME’s FedWatch tool, there is a 69% likelihood that the Fed would announce a 50 basis point cut from its meeting.
This, however, does not indicate that interest rates are not going to come down rapidly. It merely addresses the problem of immediate relief needed by consumers. In reality, if rates fall by 50 basis points and are held at a target rate of 475-500, it is still pretty high. When interest rates are high, banks and other financial institutions generally see higher profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits increase and boost net interest margins.
Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on the money they have and on the credit they issue to their customers. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 10.1% year to date as of June 30.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent that one adds a few to their portfolio.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Canadian Imperial Bank of Commerce is a diversified financial institution that provides various financial products and services. CM’s expected earnings growth rate for the current year is 7.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Barclays PLC is a global financial services company. BCS’ expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Arch Capital Group Ltd. is a global insurance, reinsurance and mortgage insurance products company. ACGL’s expected earnings growth rate for the current year is 6.6%. The Zacks Consensus Estimate for its current-year earnings has improved 5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks Investment Research
Arch Capital Group (ACGL) ended the recent trading session at $113.96, demonstrating a -0.23% swing from the preceding day's closing price. This change lagged the S&P 500's 0.03% gain on the day. On the other hand, the Dow registered a loss of 0.04%, and the technology-centric Nasdaq increased by 0.2%.
The property and casualty insurer's shares have seen an increase of 10.89% over the last month, surpassing the Finance sector's gain of 2.72% and the S&P 500's gain of 1.54%.
The investment community will be paying close attention to the earnings performance of Arch Capital Group in its upcoming release. It is anticipated that the company will report an EPS of $1.72, marking a 25.54% fall compared to the same quarter of the previous year. At the same time, our most recent consensus estimate is projecting a revenue of $3.8 billion, reflecting an 8.23% rise from the equivalent quarter last year.
Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $9.01 per share and revenue of $15.56 billion, indicating changes of +6.63% and +15.33%, respectively, compared to the previous year.
Investors should also pay attention to any latest changes in analyst estimates for Arch Capital Group. These latest adjustments often mirror the shifting dynamics of short-term business patterns. Therefore, positive revisions in estimates convey analysts' confidence in the company's business performance and profit potential.
Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.
The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. The Zacks Consensus EPS estimate has moved 0.14% higher within the past month. Arch Capital Group presently features a Zacks Rank of #2 (Buy).
In terms of valuation, Arch Capital Group is currently trading at a Forward P/E ratio of 12.68. This represents a discount compared to its industry's average Forward P/E of 13.72.
One should further note that ACGL currently holds a PEG ratio of 2.07. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. As of the close of trade yesterday, the Insurance - Property and Casualty industry held an average PEG ratio of 1.66.
The Insurance - Property and Casualty industry is part of the Finance sector. This industry, currently bearing a Zacks Industry Rank of 19, finds itself in the top 8% echelons of all 250+ industries.
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
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