Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Arch Capital Group (NASDAQ:ACGL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arch Capital Group with the means to add long-term value to shareholders.

View our latest analysis for Arch Capital Group

How Quickly Is Arch Capital Group Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Arch Capital Group has achieved impressive annual EPS growth of 44%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Arch Capital Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Arch Capital Group is growing revenues, and EBIT margins improved by 3.8 percentage points to 30%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Arch Capital Group's forecast profits?

Are Arch Capital Group Insiders Aligned With All Shareholders?

Since Arch Capital Group has a market capitalisation of US$35b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$965m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Arch Capital Group, with market caps over US$8.0b, is about US$13m.

Arch Capital Group's CEO took home a total compensation package worth US$7.1m in the year leading up to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Arch Capital Group Deserve A Spot On Your Watchlist?

Arch Capital Group's earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Arch Capital Group certainly ticks a few boxes, so we think it's probably well worth further consideration. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Arch Capital Group , and understanding this should be part of your investment process.

Although Arch Capital Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.