Reviewing Alleghany (NYSE:Y) and Arch Capital Group (ACGL)

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

Profitability

This table compares Arch Capital Group and Alleghany’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%
Alleghany 0.10% -0.14% -0.05%

Insider & Institutional Ownership

79.5% of Arch Capital Group shares are owned by institutional investors. Comparatively, 82.2% of Alleghany shares are owned by institutional investors. 6.6% of Arch Capital Group shares are owned by company insiders. Comparatively, 4.0% of Alleghany shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and price targets for Arch Capital Group and Alleghany, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Capital Group 0 6 4 0 2.40
Alleghany 0 1 1 0 2.50

Arch Capital Group presently has a consensus target price of $99.67, suggesting a potential upside of 6.45%. Alleghany has a consensus target price of $625.00, suggesting a potential upside of 6.84%. Given Alleghany’s stronger consensus rating and higher probable upside, analysts plainly believe Alleghany is more favorable than Arch Capital Group.

Earnings and Valuation

This table compares Arch Capital Group and Alleghany’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 2.79 $692.73 million $3.10 30.20
Alleghany $6.13 billion 1.47 $456.92 million ($0.13) -4,500.00

Arch Capital Group has higher earnings, but lower revenue than Alleghany. Alleghany 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.

Risk & Volatility

Arch Capital Group has a beta of 0.67, meaning that its share price is 33% less volatile than the S&P 500. Comparatively, Alleghany has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500.

Summary

Arch Capital Group beats Alleghany on 8 of the 13 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 Alleghany

Alleghany Corporation is an insurance holding company. The Company, through its subsidiary Alleghany Insurance Holdings LLC (AIHL) and its subsidiaries, is engaged in the property and casualty insurance business. AIHL’s insurance operations are conducted by its subsidiaries RSUI Group, Inc. (RSUI), CapSpecialty, Inc. (CapSpecialty) and Pacific Compensation Corporation (PacificComp). Its segments include reinsurance and insurance. Its reinsurance segment consists of property and casualty reinsurance operations conducted by Transatlantic Holdings, Inc. reinsurance operating subsidiaries. Its insurance segment consists of property and casualty insurance operations conducted by AIHL through its insurance operating subsidiaries RSUI, CapSpecialty and PacificComp. AIHL Re LLC, which is a captive reinsurance company, provides reinsurance to its insurance operating subsidiaries and affiliates.

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