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

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Essent Group $458.26 million 10.33 $222.60 million $2.99 16.08
Arch Capital Group $4.39 billion 2.70 $692.73 million $3.10 29.25

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.

Volatility and Risk

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

Institutional and Insider Ownership

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Essent Group and Arch Capital Group, as provided by MarketBeat.com.

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

Essent Group presently has a consensus price target of $49.22, indicating a potential upside of 2.38%. Arch Capital Group has a consensus price target of $99.33, indicating a potential upside of 9.53%. Given Arch Capital Group’s higher probable upside, analysts plainly believe Arch Capital Group is more favorable than Essent Group.

Profitability

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

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

Summary

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

Essent Group Company Profile

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.

Arch Capital Group Company Profile

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.

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