ARTHUR J GALLAGHER & CO (AJG) Stock Fundamental Analysis
NYSE:AJG - New York Stock Exchange, Inc. - US3635761097 - Common Stock - Currency: USD
We assign a fundamental rating of 5 out of 10 to AJG. AJG was compared to 143 industry peers in the Insurance industry. While AJG has a great profitability rating, there are quite some concerns on its financial health. AJG is valued quite expensive, but it does show an excellent growth.
1. Profitability
1.1 Basic Checks
AJG had positive earnings in the past year.
AJG had a positive operating cash flow in the past year.
AJG had positive earnings in each of the past 5 years.
Of the past 5 years AJG 4 years had a positive operating cash flow.
1.2 Ratios
AJG has a Return On Assets (2.05%) which is comparable to the rest of the industry.
With a Return On Equity value of 9.62%, AJG perfoms like the industry average, outperforming 45.39% of the companies in the same industry.
With an excellent Return On Invested Capital value of 7.89%, AJG belongs to the best of the industry, outperforming 89.36% of the companies in the same industry.
The Average Return On Invested Capital over the past 3 years for AJG is above the industry average of 4.59%.
The last Return On Invested Capital (7.89%) for AJG is above the 3 year average (6.97%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.05% | ||
| ROE | 9.62% | ||
| ROIC | 7.89% |
ROA(3y)2.35%
ROA(5y)2.69%
ROE(3y)9.48%
ROE(5y)10.47%
ROIC(3y)6.97%
ROIC(5y)6.96%
1.3 Margins
AJG's Profit Margin of 10.40% is fine compared to the rest of the industry. AJG outperforms 62.41% of its industry peers.
AJG's Profit Margin has improved in the last couple of years.
AJG has a Operating Margin of 19.52%. This is in the better half of the industry: AJG outperforms 78.01% of its industry peers.
In the last couple of years the Operating Margin of AJG has grown nicely.
AJG's Gross Margin of 45.10% is amongst the best of the industry. AJG outperforms 93.62% of its industry peers.
AJG's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 19.52% | ||
| PM (TTM) | 10.4% | ||
| GM | 45.1% |
OM growth 3Y6.19%
OM growth 5Y11.76%
PM growth 3Y4.65%
PM growth 5Y6.37%
GM growth 3Y4.45%
GM growth 5Y5.14%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), AJG is destroying value.
AJG has more shares outstanding than it did 1 year ago.
The number of shares outstanding for AJG has been increased compared to 5 years ago.
AJG has a worse debt/assets ratio than last year.
2.2 Solvency
AJG has an Altman-Z score of 1.57. This is a bad value and indicates that AJG is not financially healthy and even has some risk of bankruptcy.
AJG has a better Altman-Z score (1.57) than 83.69% of its industry peers.
AJG has a debt to FCF ratio of 3.45. This is a good value and a sign of high solvency as AJG would need 3.45 years to pay back of all of its debts.
AJG's Debt to FCF ratio of 3.45 is on the low side compared to the rest of the industry. AJG is outperformed by 60.99% of its industry peers.
A Debt/Equity ratio of 0.66 indicates that AJG is somewhat dependend on debt financing.
The Debt to Equity ratio of AJG (0.66) is worse than 81.56% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.66 | ||
| Debt/FCF | 3.45 | ||
| Altman-Z | 1.57 |
ROIC/WACC0.91
WACC8.67%
2.3 Liquidity
AJG has a Current Ratio of 1.06. This is a normal value and indicates that AJG is financially healthy and should not expect problems in meeting its short term obligations.
Looking at the Current ratio, with a value of 1.06, AJG is in the better half of the industry, outperforming 79.43% of the companies in the same industry.
A Quick Ratio of 1.06 indicates that AJG should not have too much problems paying its short term obligations.
AJG's Quick ratio of 1.06 is fine compared to the rest of the industry. AJG outperforms 79.43% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.06 | ||
| Quick Ratio | 1.06 |
3. Growth
3.1 Past
AJG shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 15.49%, which is quite good.
Measured over the past years, AJG shows a very strong growth in Earnings Per Share. The EPS has been growing by 22.61% on average per year.
Looking at the last year, AJG shows a quite strong growth in Revenue. The Revenue has grown by 14.72% in the last year.
Measured over the past years, AJG shows a quite strong growth in Revenue. The Revenue has been growing by 9.94% on average per year.
EPS 1Y (TTM)15.49%
EPS 3Y22.62%
EPS 5Y22.61%
EPS Q2Q%15.14%
Revenue 1Y (TTM)14.72%
Revenue growth 3Y12.07%
Revenue growth 5Y9.94%
Sales Q2Q%11.66%
3.2 Future
Based on estimates for the next years, AJG will show a quite strong growth in Earnings Per Share. The EPS will grow by 14.66% on average per year.
The Revenue is expected to grow by 10.21% on average over the next years. This is quite good.
EPS Next Y15.85%
EPS Next 2Y15.36%
EPS Next 3Y13.84%
EPS Next 5Y14.66%
Revenue Next Year28.09%
Revenue Next 2Y19.79%
Revenue Next 3Y14.73%
Revenue Next 5Y10.21%
3.3 Evolution
Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 32.11, the valuation of AJG can be described as expensive.
Based on the Price/Earnings ratio, AJG is valued a bit more expensive than the industry average as 78.72% of the companies are valued more cheaply.
When comparing the Price/Earnings ratio of AJG to the average of the S&P500 Index (29.63), we can say AJG is valued inline with the index average.
Based on the Price/Forward Earnings ratio of 27.71, the valuation of AJG can be described as expensive.
Compared to the rest of the industry, the Price/Forward Earnings ratio of AJG indicates a slightly more expensive valuation: AJG is more expensive than 75.18% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of AJG to the average of the S&P500 Index (22.68), we can say AJG is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.11 | ||
| Fwd PE | 27.71 |
4.2 Price Multiples
AJG's Enterprise Value to EBITDA is on the same level as the industry average.
68.79% of the companies in the same industry are cheaper than AJG, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 34.01 | ||
| EV/EBITDA | 28.9 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates AJG does not grow enough to justify the current Price/Earnings ratio.
AJG has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as AJG's earnings are expected to grow with 13.84% in the coming years.
PEG (NY)2.03
PEG (5Y)1.42
EPS Next 2Y15.36%
EPS Next 3Y13.84%
5. Dividend
5.1 Amount
With a yearly dividend of 0.79%, AJG is not a good candidate for dividend investing.
AJG's Dividend Yield is slightly below the industry average, which is at 3.09.
Compared to an average S&P500 Dividend Yield of 2.29, AJG's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.79% |
5.2 History
The dividend of AJG has a limited annual growth rate of 5.97%.
AJG has paid a dividend for at least 10 years, which is a reliable track record.
AJG has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)5.97%
Div Incr Years14
Div Non Decr Years34
5.3 Sustainability
43.74% of the earnings are spent on dividend by AJG. This is a bit on the high side, but may be sustainable.
The dividend of AJG is growing, but earnings are growing more, so the dividend growth is sustainable.
DP43.74%
EPS Next 2Y15.36%
EPS Next 3Y13.84%
325.56
+0.43 (+0.13%)
Chartmill FA Rating
GICS SectorFinancials
GICS IndustryGroupInsurance
GICS IndustryInsurance
Earnings (Last)
Earnings (Next)
Inst Owners88.61%
Inst Owner Change23.39%
Ins Owners0.73%
Ins Owner Change5.24%
Market Cap81.39B
Analysts76.36
Price Target314.75 (-3.32%)
Short Float %1.25%
Short Ratio1.33
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.79% |
Yearly Dividend2.21
Dividend Growth(5Y)5.97%
DP43.74%
Div Incr Years14
Div Non Decr Years34
Ex-Date
Surprises & Revisions
EPS beat(2)0
Avg EPS beat(2)-0.78%
Min EPS beat(2)-1.48%
Max EPS beat(2)-0.08%
EPS beat(4)1
Avg EPS beat(4)-0.28%
Min EPS beat(4)-1.48%
Max EPS beat(4)1.34%
EPS beat(8)4
Avg EPS beat(8)-1.53%
EPS beat(12)8
Avg EPS beat(12)-0.42%
EPS beat(16)12
Avg EPS beat(16)1.57%
Revenue beat(2)0
Avg Revenue beat(2)-2.1%
Min Revenue beat(2)-2.19%
Max Revenue beat(2)-2.02%
Revenue beat(4)0
Avg Revenue beat(4)-1.7%
Min Revenue beat(4)-2.19%
Max Revenue beat(4)-0.67%
Revenue beat(8)2
Avg Revenue beat(8)-0.28%
Revenue beat(12)5
Avg Revenue beat(12)0.59%
Revenue beat(16)9
Avg Revenue beat(16)5.32%
PT rev (1m)3.35%
PT rev (3m)5.14%
EPS NQ rev (1m)-3.39%
EPS NQ rev (3m)-3.45%
EPS NY rev (1m)1.5%
EPS NY rev (3m)3.14%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)0%
Revenue NY rev (1m)8.17%
Revenue NY rev (3m)16.42%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.11 | ||
| Fwd PE | 27.71 | ||
| P/S | 7.22 | ||
| P/FCF | 34.01 | ||
| P/OCF | 32.08 | ||
| P/B | 6.68 | ||
| P/tB | N/A | ||
| EV/EBITDA | 28.9 |
EPS(TTM)10.14
EY3.11%
EPS(NY)11.75
Fwd EY3.61%
FCF(TTM)9.57
FCFY2.94%
OCF(TTM)10.15
OCFY3.12%
SpS45.08
BVpS48.74
TBVpS-17.45
PEG (NY)2.03
PEG (5Y)1.42
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.05% | ||
| ROE | 9.62% | ||
| ROCE | 9.98% | ||
| ROIC | 7.89% | ||
| ROICexc | 8.67% | ||
| ROICexgc | 47.11% | ||
| OM | 19.52% | ||
| PM (TTM) | 10.4% | ||
| GM | 45.1% | ||
| FCFM | 21.23% |
ROA(3y)2.35%
ROA(5y)2.69%
ROE(3y)9.48%
ROE(5y)10.47%
ROIC(3y)6.97%
ROIC(5y)6.96%
ROICexc(3y)8.48%
ROICexc(5y)7.98%
ROICexgc(3y)44.25%
ROICexgc(5y)37.97%
ROCE(3y)8.82%
ROCE(5y)8.82%
ROICexcg growth 3Y23.28%
ROICexcg growth 5Y13.82%
ROICexc growth 3Y11.04%
ROICexc growth 5Y7.3%
OM growth 3Y6.19%
OM growth 5Y11.76%
PM growth 3Y4.65%
PM growth 5Y6.37%
GM growth 3Y4.45%
GM growth 5Y5.14%
F-Score6
Asset Turnover0.2
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.66 | ||
| Debt/FCF | 3.45 | ||
| Debt/EBITDA | 2.67 | ||
| Cap/Depr | 17.62% | ||
| Cap/Sales | 1.28% | ||
| Interest Coverage | 6.31 | ||
| Cash Conversion | 84.05% | ||
| Profit Quality | 204.14% | ||
| Current Ratio | 1.06 | ||
| Quick Ratio | 1.06 | ||
| Altman-Z | 1.57 |
F-Score6
WACC8.67%
ROIC/WACC0.91
Cap/Depr(3y)N/A
Cap/Depr(5y)N/A
Cap/Sales(3y)N/A
Cap/Sales(5y)N/A
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)15.49%
EPS 3Y22.62%
EPS 5Y22.61%
EPS Q2Q%15.14%
EPS Next Y15.85%
EPS Next 2Y15.36%
EPS Next 3Y13.84%
EPS Next 5Y14.66%
Revenue 1Y (TTM)14.72%
Revenue growth 3Y12.07%
Revenue growth 5Y9.94%
Sales Q2Q%11.66%
Revenue Next Year28.09%
Revenue Next 2Y19.79%
Revenue Next 3Y14.73%
Revenue Next 5Y10.21%
EBIT growth 1Y7.75%
EBIT growth 3Y19.01%
EBIT growth 5Y22.86%
EBIT Next Year69.2%
EBIT Next 3Y27.45%
EBIT Next 5YN/A
FCF growth 1Y77.45%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y64.91%
OCF growth 3YN/A
OCF growth 5YN/A