Arch Capital Group (NASDAQ: ACGL) and Essent Group (NYSE:ESNT) are both mid-cap financials companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Analyst Recommendations

This is a breakdown of recent ratings for Arch Capital Group and Essent Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Capital Group 0 6 4 0 2.40
Essent Group 0 1 8 0 2.89

Arch Capital Group currently has a consensus target price of $99.33, indicating a potential upside of 11.77%. Essent Group has a consensus target price of $49.22, indicating a potential upside of 2.89%. Given Arch Capital Group’s higher probable upside, analysts plainly believe Arch Capital Group is more favorable than Essent Group.

Earnings & Valuation

This table compares Arch Capital Group and Essent Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arch Capital Group $4.39 billion 2.65 $692.73 million $3.09 28.76
Essent Group $458.26 million 10.28 $222.60 million $2.98 16.05

Arch Capital Group has higher revenue and earnings than Essent Group. Essent Group is trading at a lower price-to-earnings ratio than Arch Capital Group, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

79.4% of Arch Capital Group shares are owned by institutional investors. Comparatively, 85.8% of Essent Group shares are owned by institutional investors. 6.6% of Arch Capital Group shares are owned by insiders. Comparatively, 18.1% of Essent Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Arch Capital Group has a beta of 0.67, suggesting that its share price is 33% less volatile than the S&P 500. Comparatively, Essent Group has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500.

Profitability

This table compares Arch Capital Group and Essent Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arch Capital Group 9.44% 5.57% 1.44%
Essent Group 51.64% 18.55% 13.15%

Summary

Essent Group beats Arch Capital Group on 9 of the 14 factors compared between the two stocks.

About Arch Capital Group

Arch Capital Group Ltd. provides insurance, reinsurance and mortgage insurance. The Company provides a range of property, casualty and mortgage insurance and reinsurance lines. The Company operates in five segments: insurance, reinsurance, mortgage, other and corporate. The insurance segment’s product lines include construction and national accounts; excess and surplus casualty; lenders products; professional lines; programs; property, energy, marine and aviation; travel, accident and health, and other. The reinsurance segment’s product lines include casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe, and other. The mortgage segment includes the results of Arch Mortgage Insurance Company and Arch Mortgage Insurance Designated Activity Company, which are providers of mortgage insurance products and services to the United States and European markets. The other segment includes the results of Watford Holdings Ltd.

About Essent Group

Essent Group Ltd. is a private mortgage insurance company. The Company is engaged in offering private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its products and services include mortgage insurance, contract underwriting, and Bermuda-based insurance and reinsurance. The Company’s primary mortgage insurance is offered to customers on individual loans at the time of origination on a flow basis, but can also be written in bulk transactions. Its pool insurance provides additional credit enhancement for certain secondary market and other mortgage transactions. The primary mortgage insurance operations were conducted through Essent Guaranty, Inc. which is a mortgage insurer licensed to write mortgage insurance in all 50 states and the District of Columbia, as of December 31, 2016. It offers primary mortgage insurance, pool insurance and master policy. It provides contract underwriting services through CUW Solutions, LLC.

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