Arch Capital Group Ltd. provides property, casualty, and mortgage insurance and reinsurance products worldwide. The Company operates in two underwriting segments: insurance and reinsurance and mortgage. The company was founded in 1995 and is based in Pembroke, Bermuda.
ACGL Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Arch Capital Group Ltd with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Arch Capital Group Ltd ranked in the 77th percentile in terms of potential gain offered. Specifically, our DCF analysis implies the stock is trading below its fair value by an estimated 355.5%. The most interesting components of our discounted cash flow analysis for Arch Capital Group Ltd ended up being:
Interest coverage, a measure of earnings relative to interest payments, is 12.82; that's higher than 71.75% of US stocks in the Financial Services sector that have positive free cash flow.
ACGL's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than 30.36% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
For other companies in the Financial Services that have a similar discounted cashflow valuation profile (and ensuing price forecasts) as ACGL, try IVZ, OXSQ, ADS, MMAC, and EV.
Baron Asset Fund recently published its first-quarter commentary – a copy of which can be downloaded here. During the first quarter of 2020, the Baron Asset Fund returned -16.63% (institutional shares). In comparison, the benchmark S&P 500 Index was down 19.60%, while the Russell Midcap Growth Index was down 20.04%. In the said letter, Baron Asset […]