Arch Capital Group Ltd.'s (NASDAQ:ACGL) price-to-earnings (or "P/E") ratio of 9.4x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 33x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Arch Capital Group certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
View our latest analysis for Arch Capital Group
NasdaqGS:ACGL Price to Earnings Ratio vs Industry December 22nd 2023 If you'd like to see what analysts are forecasting going forward, you should check out our free report on Arch Capital Group.
How Is Arch Capital Group's Growth Trending?
There's an inherent assumption that a company should underperform the market for P/E ratios like Arch Capital Group's to be considered reasonable.
If we review the last year of earnings growth, the company posted a terrific increase of 147%. The strong recent performance means it was also able to grow EPS by 177% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 5.3% per year over the next three years. With the market predicted to deliver 13% growth per year, the company is positioned for a weaker earnings result.
In light of this, it's understandable that Arch Capital Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Final Word
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
As we suspected, our examination of Arch Capital Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.
Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Arch Capital Group that you should be aware of.
You might be able to find a better investment than Arch Capital Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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Arch Capital Group 有限公司。”s(納斯達克股票代碼:ACGL)的市盈率(或 “市盈率”)爲9.4倍,與美國市場相比,目前可能看起來像買入。在美國,約有一半公司的市盈率高於17倍,甚至市盈率超過33倍也很常見。但是,僅按面值計算市盈率是不明智的,因爲可以解釋爲什麼市盈率有限。
Arch Capital Group最近確實做得很好,因爲其收益的增長幅度超過了大多數其他公司。一種可能性是市盈率很低,因爲投資者認爲這種強勁的盈利表現今後可能不那麼令人印象深刻。如果你喜歡這家公司,你希望情況並非如此,這樣你就有可能在它失寵的時候買入一些股票。