Critical Contrast: Arch Capital Group (NASDAQ:ACGL) versus Trupanion (NASDAQ:TRUP)

Trupanion (NASDAQ:TRUP) and Arch Capital Group (NASDAQ:ACGL) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, dividends, profitability, analyst recommendations, valuation, earnings and risk.

Risk and Volatility

Trupanion has a beta of 1.44, indicating that its stock price is 44% more volatile than the S&P 500. Comparatively, Arch Capital Group has a beta of 0.28, indicating that its stock price is 72% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Trupanion	1.53%	5.96%	2.55%
Arch Capital Group	23.31%	16.62%	4.64%

Valuation & Earnings

This table compares Trupanion and Arch Capital Group”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Trupanion	$1.44 billion	0.93	$19.43 million	$0.53	57.45
Arch Capital Group	$18.07 billion	2.04	$4.40 billion	$12.23	8.84

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

Analyst Recommendations

This is a breakdown of current recommendations for Trupanion and Arch Capital Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Trupanion	0	5	1	0	2.17
Arch Capital Group	1	8	7	0	2.38

Trupanion presently has a consensus target price of $38.40, indicating a potential upside of 26.11%. Arch Capital Group has a consensus target price of $111.29, indicating a potential upside of 2.97%. Given Trupanion’s higher probable upside, research analysts plainly believe Trupanion is more favorable than Arch Capital Group.

Institutional and Insider Ownership

89.1% of Arch Capital Group shares are owned by institutional investors. 5.6% of Trupanion shares are owned by company insiders. Comparatively, 3.3% of Arch Capital Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Arch Capital Group beats Trupanion on 10 of the 14 factors compared between the two stocks.

About Trupanion

Trupanion, Inc., together with its subsidiaries, provides medical insurance for cats and dogs on a monthly subscription basis in the United States, Canada, Continental Europe, and Australia. The company operates in two segments, Subscription Business and Other Business. It serves pet owners and veterinarians. The company was formerly known as Vetinsurance International, Inc. changed its name to Trupanion, Inc. in 2013. Trupanion, Inc. was founded in 2000 and is headquartered in Seattle, Washington.

About Arch Capital Group

Arch Capital Group Ltd., together with its subsidiaries, provides insurance, reinsurance, and mortgage insurance products worldwide. The company's Insurance segment offers primary and excess casualty coverages; loss sensitive primary casualty insurance programs; directors' and officers' liability, errors and omissions liability, employment practices and fiduciary liability, crime, professional indemnity, and other financial related coverages; medical professional and general liability insurance coverages; and workers' compensation and umbrella liability, as well as commercial automobile and inland marine products. It also provides property, energy, marine, and aviation insurance; travel insurance; accident, disability, and medical plan insurance coverages; captive insurance programs; employer's liability; contract and commercial surety coverages; and collateral protection, debt cancellation, and service contract reimbursement products. This segment markets its products through a group of licensed independent retail and wholesale brokers. Its Reinsurance segment provides casualty reinsurance for third party liability exposures; marine and aviation; motor reinsurance, whole account multi-line treaties, cyber, trade credit, surety, accident and health, workers' compensation catastrophe, agriculture, trade credit, and political risk products; reinsurance protection for catastrophic losses, and personal lines and commercial property exposures; life reinsurance; casualty clash; and risk management solutions. This segment markets its reinsurance products through brokers. The company's Mortgage segment offers direct mortgage insurance and mortgage reinsurance. The company was founded in 1995 and is based in Pembroke, Bermuda.