Arch Capital Group's (NASDAQ:ACGL) three-year earnings growth trails the splendid shareholder returns

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Arch Capital Group Ltd. (NASDAQ:ACGL) share price is 185% higher than it was three years ago. How nice for those who held the stock! In more good news, the share price has risen 15% in thirty days. We note that Arch Capital Group reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

The past week has proven to be lucrative for Arch Capital Group investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Arch Capital Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Arch Capital Group was able to grow its EPS at 42% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 42% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Arch Capital Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Arch Capital Group has rewarded shareholders with a total shareholder return of 47% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Arch Capital Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Arch Capital Group you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.