MARSH & MCLENNAN COS (NYSE:MMC) – A Quality Stock Worth Considering

MARSH & MCLENNAN COS (NYSE:MMC) was identified by our Caviar Cruise screen as a potential candidate for quality investors. The company demonstrates strong profitability, consistent growth, and efficient capital allocation, making it an interesting option for long-term investors. Below, we examine why MMC fits the criteria of a quality stock.

Key Strengths of MMC

• High Return on Invested Capital (ROIC): MMC’s ROIC (excluding cash and goodwill) stands at 56.94%, well above the 15% threshold required by the Caviar Cruise screen. This indicates the company generates substantial returns from its capital investments.
• Strong EBIT Growth: Over the past five years, MMC has delivered an annual EBIT growth rate of 15.58%, outpacing its revenue growth of 6.03%. This suggests improving operational efficiency and pricing power.
• Healthy Profit Quality: The company’s five-year average profit quality (free cash flow to net income) is 109.53%, meaning it converts net income into cash flow efficiently.
• Manageable Debt Levels: MMC’s debt-to-free cash flow ratio is 4.91, within the acceptable range of below 5, indicating it can service its debt comfortably.

Fundamental Analysis Summary

MMC has an overall fundamental rating of 5 out of 10, with strengths in profitability but some concerns regarding valuation and debt levels. Key takeaways:

• Profitability: Scores 8/10, with high ROE (28.73%) and strong margins.
• Growth: Revenue and earnings have grown steadily, with analysts expecting continued growth.
• Valuation: Currently priced at a P/E of 22.88, which is slightly expensive compared to peers.
• Dividend: Offers a 1.70% yield with a reliable track record of increases.

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Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.