Intrinsic value of Arch Capital Group - ACGL

Previous Close

$89.80

  Intrinsic Value

$390.75

stock screener

  Rating & Target

str. buy

+335%

Previous close

$89.80

 
Intrinsic value

$390.75

 
Up/down potential

+335%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as ACGL.

We calculate the intrinsic value of ACGL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.10
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  0
  5,153
  5,916
  6,734
  7,606
  8,530
  9,506
  10,532
  11,607
  12,732
  13,907
  15,131
  16,405
  17,730
  19,108
  20,539
  22,027
  23,574
  25,181
  26,852
  28,590
  30,398
  32,281
  34,241
  36,284
  38,414
  40,635
  42,953
  45,373
  47,900
  50,541
Variable operating expenses, $m
 
  1,989
  2,284
  2,599
  2,936
  3,293
  3,669
  4,065
  4,480
  4,915
  5,368
  5,840
  6,332
  6,844
  7,376
  7,928
  8,503
  9,099
  9,720
  10,365
  11,036
  11,734
  12,460
  13,217
  14,006
  14,828
  15,685
  16,580
  17,514
  18,489
  19,509
Fixed operating expenses, $m
 
  1,986
  2,036
  2,087
  2,139
  2,193
  2,247
  2,304
  2,361
  2,420
  2,481
  2,543
  2,606
  2,672
  2,738
  2,807
  2,877
  2,949
  3,023
  3,098
  3,176
  3,255
  3,336
  3,420
  3,505
  3,593
  3,683
  3,775
  3,869
  3,966
  4,065
Total operating expenses, $m
  3,609
  3,975
  4,320
  4,686
  5,075
  5,486
  5,916
  6,369
  6,841
  7,335
  7,849
  8,383
  8,938
  9,516
  10,114
  10,735
  11,380
  12,048
  12,743
  13,463
  14,212
  14,989
  15,796
  16,637
  17,511
  18,421
  19,368
  20,355
  21,383
  22,455
  23,574
Operating income, $m
  837
  1,177
  1,596
  2,048
  2,531
  3,045
  3,589
  4,163
  4,766
  5,397
  6,058
  6,747
  7,466
  8,215
  8,994
  9,804
  10,648
  11,525
  12,438
  13,389
  14,378
  15,409
  16,484
  17,604
  18,773
  19,993
  21,267
  22,598
  23,990
  25,445
  26,967
EBITDA, $m
  837
  1,228
  1,655
  2,114
  2,606
  3,129
  3,683
  4,267
  4,881
  5,523
  6,196
  6,897
  7,628
  8,390
  9,183
  10,008
  10,866
  11,759
  12,688
  13,655
  14,662
  15,710
  16,803
  17,943
  19,132
  20,373
  21,669
  23,023
  24,439
  25,919
  27,468
Interest expense (income), $m
  63
  87
  207
  334
  470
  616
  770
  932
  1,103
  1,282
  1,470
  1,666
  1,870
  2,082
  2,303
  2,532
  2,771
  3,019
  3,277
  3,545
  3,823
  4,113
  4,414
  4,728
  5,054
  5,395
  5,750
  6,120
  6,506
  6,910
  7,331
Earnings before tax, $m
  856
  1,090
  1,390
  1,714
  2,061
  2,429
  2,819
  3,231
  3,663
  4,115
  4,588
  5,082
  5,596
  6,133
  6,691
  7,272
  7,877
  8,506
  9,162
  9,844
  10,556
  11,297
  12,070
  12,877
  13,719
  14,598
  15,517
  16,478
  17,483
  18,535
  19,636
Tax expense, $m
  32
  294
  375
  463
  556
  656
  761
  872
  989
  1,111
  1,239
  1,372
  1,511
  1,656
  1,807
  1,963
  2,127
  2,297
  2,474
  2,658
  2,850
  3,050
  3,259
  3,477
  3,704
  3,941
  4,190
  4,449
  4,721
  5,005
  5,302
Net income, $m
  693
  796
  1,014
  1,251
  1,504
  1,773
  2,058
  2,358
  2,674
  3,004
  3,349
  3,710
  4,085
  4,477
  4,884
  5,309
  5,750
  6,210
  6,688
  7,186
  7,706
  8,247
  8,811
  9,400
  10,015
  10,657
  11,328
  12,029
  12,763
  13,531
  14,335

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  29,372
  34,125
  39,179
  44,597
  50,371
  56,492
  62,952
  69,747
  76,870
  84,320
  92,097
  100,202
  108,640
  117,416
  126,540
  136,023
  145,876
  156,117
  166,760
  177,827
  189,336
  201,312
  213,779
  226,763
  240,291
  254,395
  269,106
  284,456
  300,482
  317,220
  334,710
Adjusted assets (=assets-cash), $m
  29,372
  34,125
  39,179
  44,597
  50,371
  56,492
  62,952
  69,747
  76,870
  84,320
  92,097
  100,202
  108,640
  117,416
  126,540
  136,023
  145,876
  156,117
  166,760
  177,827
  189,336
  201,312
  213,779
  226,763
  240,291
  254,395
  269,106
  284,456
  300,482
  317,220
  334,710
Revenue / Adjusted assets
  0.000
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
Average production assets, $m
  440
  510
  586
  667
  753
  844
  941
  1,043
  1,149
  1,261
  1,377
  1,498
  1,624
  1,755
  1,892
  2,033
  2,181
  2,334
  2,493
  2,658
  2,830
  3,009
  3,196
  3,390
  3,592
  3,803
  4,023
  4,252
  4,492
  4,742
  5,004
Working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  2,489
  5,907
  9,541
  13,436
  17,588
  21,989
  26,634
  31,519
  36,641
  41,997
  47,589
  53,416
  59,483
  65,793
  72,353
  79,171
  86,256
  93,619
  101,272
  109,228
  117,504
  126,115
  135,078
  144,413
  154,140
  164,281
  174,858
  185,895
  197,417
  209,452
  222,027
Total liabilities, $m
  21,118
  24,536
  28,170
  32,065
  36,217
  40,618
  45,263
  50,148
  55,270
  60,626
  66,218
  72,045
  78,112
  84,422
  90,982
  97,800
  104,885
  112,248
  119,901
  127,857
  136,133
  144,744
  153,707
  163,042
  172,769
  182,910
  193,487
  204,524
  216,046
  228,081
  240,656
Total equity, $m
  8,254
  9,589
  11,009
  12,532
  14,154
  15,874
  17,690
  19,599
  21,600
  23,694
  25,879
  28,157
  30,528
  32,994
  35,558
  38,222
  40,991
  43,869
  46,860
  49,969
  53,204
  56,569
  60,072
  63,720
  67,522
  71,485
  75,619
  79,932
  84,435
  89,139
  94,053
Total liabilities and equity, $m
  29,372
  34,125
  39,179
  44,597
  50,371
  56,492
  62,953
  69,747
  76,870
  84,320
  92,097
  100,202
  108,640
  117,416
  126,540
  136,022
  145,876
  156,117
  166,761
  177,826
  189,337
  201,313
  213,779
  226,762
  240,291
  254,395
  269,106
  284,456
  300,481
  317,220
  334,709
Debt-to-equity ratio
  0.302
  0.620
  0.870
  1.070
  1.240
  1.390
  1.510
  1.610
  1.700
  1.770
  1.840
  1.900
  1.950
  1.990
  2.030
  2.070
  2.100
  2.130
  2.160
  2.190
  2.210
  2.230
  2.250
  2.270
  2.280
  2.300
  2.310
  2.330
  2.340
  2.350
  2.360
Adjusted equity ratio
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  693
  796
  1,014
  1,251
  1,504
  1,773
  2,058
  2,358
  2,674
  3,004
  3,349
  3,710
  4,085
  4,477
  4,884
  5,309
  5,750
  6,210
  6,688
  7,186
  7,706
  8,247
  8,811
  9,400
  10,015
  10,657
  11,328
  12,029
  12,763
  13,531
  14,335
Depreciation, amort., depletion, $m
  0
  51
  59
  67
  75
  84
  94
  104
  115
  126
  138
  150
  162
  176
  189
  203
  218
  233
  249
  266
  283
  301
  320
  339
  359
  380
  402
  425
  449
  474
  500
Funds from operations, $m
  1,877
  847
  1,073
  1,318
  1,580
  1,858
  2,152
  2,463
  2,789
  3,130
  3,487
  3,859
  4,248
  4,652
  5,074
  5,512
  5,968
  6,443
  6,937
  7,452
  7,989
  8,548
  9,131
  9,739
  10,374
  11,037
  11,730
  12,454
  13,212
  14,005
  14,835
Change in working capital, $m
  480
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  1,397
  847
  1,073
  1,318
  1,580
  1,858
  2,152
  2,463
  2,789
  3,130
  3,487
  3,859
  4,248
  4,652
  5,074
  5,512
  5,968
  6,443
  6,937
  7,452
  7,989
  8,548
  9,131
  9,739
  10,374
  11,037
  11,730
  12,454
  13,212
  14,005
  14,835
Maintenance CAPEX, $m
  0
  -44
  -51
  -59
  -67
  -75
  -84
  -94
  -104
  -115
  -126
  -138
  -150
  -162
  -176
  -189
  -203
  -218
  -233
  -249
  -266
  -283
  -301
  -320
  -339
  -359
  -380
  -402
  -425
  -449
  -474
New CAPEX, $m
  -15
  -70
  -76
  -81
  -86
  -92
  -97
  -102
  -106
  -111
  -116
  -121
  -126
  -131
  -136
  -142
  -147
  -153
  -159
  -165
  -172
  -179
  -186
  -194
  -202
  -211
  -220
  -229
  -240
  -250
  -261
Cash from investing activities, $m
  -2,722
  -114
  -127
  -140
  -153
  -167
  -181
  -196
  -210
  -226
  -242
  -259
  -276
  -293
  -312
  -331
  -350
  -371
  -392
  -414
  -438
  -462
  -487
  -514
  -541
  -570
  -600
  -631
  -665
  -699
  -735
Free cash flow, $m
  -1,325
  733
  946
  1,178
  1,427
  1,691
  1,971
  2,267
  2,578
  2,904
  3,245
  3,601
  3,972
  4,359
  4,762
  5,181
  5,618
  6,072
  6,545
  7,037
  7,551
  8,086
  8,643
  9,225
  9,833
  10,467
  11,130
  11,823
  12,547
  13,305
  14,099
Issuance/(repayment) of debt, $m
  1,168
  3,418
  3,634
  3,896
  4,151
  4,401
  4,645
  4,885
  5,122
  5,357
  5,592
  5,828
  6,067
  6,310
  6,560
  6,818
  7,085
  7,363
  7,653
  7,957
  8,275
  8,611
  8,963
  9,335
  9,727
  10,141
  10,577
  11,037
  11,523
  12,035
  12,575
Issuance/(repurchase) of shares, $m
  357
  539
  406
  271
  118
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,664
  3,957
  4,040
  4,167
  4,269
  4,401
  4,645
  4,885
  5,122
  5,357
  5,592
  5,828
  6,067
  6,310
  6,560
  6,818
  7,085
  7,363
  7,653
  7,957
  8,275
  8,611
  8,963
  9,335
  9,727
  10,141
  10,577
  11,037
  11,523
  12,035
  12,575
Total cash flow (excl. dividends), $m
  318
  4,690
  4,986
  5,345
  5,696
  6,092
  6,616
  7,152
  7,700
  8,260
  8,836
  9,428
  10,039
  10,669
  11,322
  11,999
  12,702
  13,435
  14,198
  14,994
  15,826
  16,696
  17,607
  18,560
  19,560
  20,608
  21,706
  22,860
  24,070
  25,340
  26,674
Retained Cash Flow (-), $m
  -2,049
  -1,335
  -1,420
  -1,522
  -1,622
  -1,720
  -1,815
  -1,909
  -2,002
  -2,094
  -2,185
  -2,278
  -2,371
  -2,466
  -2,564
  -2,665
  -2,769
  -2,878
  -2,991
  -3,110
  -3,234
  -3,365
  -3,503
  -3,648
  -3,802
  -3,963
  -4,134
  -4,313
  -4,503
  -4,703
  -4,915
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,355
  3,566
  3,823
  4,074
  4,372
  4,801
  5,243
  5,698
  6,167
  6,651
  7,151
  7,668
  8,203
  8,758
  9,334
  9,933
  10,557
  11,207
  11,885
  12,592
  13,331
  14,104
  14,912
  15,758
  16,644
  17,573
  18,546
  19,567
  20,637
  21,760
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  3,189
  3,206
  3,234
  3,224
  3,218
  3,265
  3,272
  3,239
  3,168
  3,062
  2,924
  2,758
  2,570
  2,364
  2,146
  1,922
  1,697
  1,477
  1,265
  1,066
  883
  719
  574
  450
  345
  259
  190
  136
  95
  65
Current shareholders' claim on cash, %
  100
  95.6
  92.8
  91.3
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7

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.

FINANCIAL RATIOS  of  Arch Capital Group (ACGL)

Valuation Ratios
P/E Ratio 15.9
Price to Sales 2.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 8
Growth Rates
Sales Growth Rate 13.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.3%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 30.2%
Total Debt to Equity 30.2%
Interest Coverage 15
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 7.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.1%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 20.7%
EBITDA Margin - 3 Yr. Avg. 19.6%
Operating Margin 18.8%
Oper. Margin - 3 Yr. Avg. 17.2%
Pre-Tax Margin 19.3%
Pre-Tax Margin - 3 Yr. Avg. 18.3%
Net Profit Margin 15.6%
Net Profit Margin - 3 Yr. Avg. 16.7%
Effective Tax Rate 3.7%
Eff/ Tax Rate - 3 Yr. Avg. 4.5%
Payout Ratio 4%

ACGL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACGL stock intrinsic value calculation we used $4446 million for the last fiscal year's total revenue generated by Arch Capital Group. The default revenue input number comes from 2016 income statement of Arch Capital Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ACGL stock valuation model: a) initial revenue growth rate of 15.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.2%, whose default value for ACGL is calculated based on our internal credit rating of Arch Capital Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Arch Capital Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ACGL stock the variable cost ratio is equal to 38.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1938 million in the base year in the intrinsic value calculation for ACGL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Arch Capital Group.

Corporate tax rate of 27% is the nominal tax rate for Arch Capital Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ACGL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ACGL are equal to 9.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Arch Capital Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ACGL is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $8254 million for Arch Capital Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 130.788 million for Arch Capital Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Arch Capital Group at the current share price and the inputted number of shares is $11.7 billion.

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COMPANY NEWS

▶ Is It The Right Time To Buy Arch Capital Group Ltd (ACGL)?   [Nov-16-17 05:47PM  Simply Wall St.]
▶ How AIGs Valuation Compares after 3Q17   [Nov-15-17 10:30AM  Market Realist]
▶ A Look at AIGs Individual Retirement Business   [Nov-14-17 09:01AM  Market Realist]
▶ Arch Capital reports 3Q loss   [04:13PM  Associated Press]
▶ Arch Capital beats 2Q profit forecasts   [Jul-26-17 11:48PM  Associated Press]
▶ Arch Capital beats 1Q profit forecasts   [Apr-25-17 05:06PM  Associated Press]
▶ Arch Capital beats 4Q profit forecasts   [Feb-13-17 05:04PM  Associated Press]
Financial statements of ACGL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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