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 shows excellent growth, but is valued quite expensive already.
1. Profitability
1.1 Basic Checks
AJG had positive earnings in the past year.
In the past year AJG had a positive cash flow from operations.
AJG had positive earnings in each of the past 5 years.
AJG had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
Looking at the Return On Assets, with a value of 2.10%, AJG is in line with its industry, outperforming 52.45% of the companies in the same industry.
AJG's Return On Equity of 6.98% is on the low side compared to the rest of the industry. AJG is outperformed by 66.43% of its industry peers.
AJG's Return On Invested Capital of 6.31% is amongst the best of the industry. AJG outperforms 88.11% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for AJG is above the industry average of 4.07%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.1% | ||
| ROE | 6.98% | ||
| ROIC | 6.31% |
ROA(3y)2.35%
ROA(5y)2.69%
ROE(3y)9.48%
ROE(5y)10.47%
ROIC(3y)7.35%
ROIC(5y)7.18%
1.3 Margins
AJG has a Profit Margin of 12.96%. This is in the better half of the industry: AJG outperforms 76.92% of its industry peers.
In the last couple of years the Profit Margin of AJG has grown nicely.
AJG has a Operating Margin of 24.43%. This is amongst the best in the industry. AJG outperforms 88.11% of its industry peers.
In the last couple of years the Operating Margin of AJG has grown nicely.
AJG has a better Gross Margin (45.97%) than 93.71% of its industry peers.
In the last couple of years the Gross Margin of AJG has grown nicely.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 24.43% | ||
| PM (TTM) | 12.96% | ||
| GM | 45.97% |
OM growth 3Y13.45%
OM growth 5Y16.28%
PM growth 3Y4.65%
PM growth 5Y6.37%
GM growth 3Y6.97%
GM growth 5Y6.66%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), AJG is destroying value.
The number of shares outstanding for AJG has been increased compared to 1 year ago.
AJG has more shares outstanding than it did 5 years ago.
Compared to 1 year ago, AJG has a worse debt to assets ratio.
2.2 Solvency
AJG has an Altman-Z score of 1.60. This is a bad value and indicates that AJG is not financially healthy and even has some risk of bankruptcy.
With an excellent Altman-Z score value of 1.60, AJG belongs to the best of the industry, outperforming 88.11% of the companies in the same industry.
The Debt to FCF ratio of AJG is 5.18, which is a neutral value as it means it would take AJG, 5.18 years of fcf income to pay off all of its debts.
AJG has a Debt to FCF ratio of 5.18. This is in the lower half of the industry: AJG underperforms 67.83% of its industry peers.
A Debt/Equity ratio of 0.56 indicates that AJG is somewhat dependend on debt financing.
AJG's Debt to Equity ratio of 0.56 is on the low side compared to the rest of the industry. AJG is outperformed by 73.43% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.56 | ||
| Debt/FCF | 5.18 | ||
| Altman-Z | 1.6 |
ROIC/WACC0.69
WACC9.18%
2.3 Liquidity
AJG has a Current Ratio of 1.44. This is a normal value and indicates that AJG is financially healthy and should not expect problems in meeting its short term obligations.
AJG's Current ratio of 1.44 is amongst the best of the industry. AJG outperforms 88.81% of its industry peers.
A Quick Ratio of 1.44 indicates that AJG should not have too much problems paying its short term obligations.
AJG has a better Quick ratio (1.44) than 88.81% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.44 | ||
| Quick Ratio | 1.44 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 11.69% over the past year.
AJG shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 22.61% yearly.
The Revenue has grown by 13.21% in the past year. This is quite good.
AJG shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 9.94% yearly.
EPS 1Y (TTM)11.69%
EPS 3Y22.62%
EPS 5Y22.61%
EPS Q2Q%5.16%
Revenue 1Y (TTM)13.21%
Revenue growth 3Y12.07%
Revenue growth 5Y9.94%
Sales Q2Q%15.35%
3.2 Future
AJG is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 15.95% yearly.
Based on estimates for the next years, AJG will show a quite strong growth in Revenue. The Revenue will grow by 13.92% on average per year.
EPS Next Y10.46%
EPS Next 2Y16.38%
EPS Next 3Y14.75%
EPS Next 5Y15.95%
Revenue Next Year22.24%
Revenue Next 2Y22.58%
Revenue Next 3Y17.32%
Revenue Next 5Y13.92%
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.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 30.68, AJG can be considered very expensive at the moment.
AJG's Price/Earnings ratio is a bit more expensive when compared to the industry. AJG is more expensive than 77.62% of the companies in the same industry.
When comparing the Price/Earnings ratio of AJG to the average of the S&P500 Index (26.31), we can say AJG is valued inline with the index average.
With a Price/Forward Earnings ratio of 23.06, AJG is valued on the expensive side.
Based on the Price/Forward Earnings ratio, AJG is valued a bit more expensive than the industry average as 76.22% of the companies are valued more cheaply.
The average S&P500 Price/Forward Earnings ratio is at 22.13. AJG is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.68 | ||
| Fwd PE | 23.06 |
4.2 Price Multiples
AJG's Enterprise Value to EBITDA ratio is a bit more expensive when compared to the industry. AJG is more expensive than 63.64% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, AJG is valued a bit more expensive than the industry average as 76.22% of the companies are valued more cheaply.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 32.12 | ||
| EV/EBITDA | 20.21 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The decent profitability rating of AJG may justify a higher PE ratio.
A more expensive valuation may be justified as AJG's earnings are expected to grow with 14.75% in the coming years.
PEG (NY)2.93
PEG (5Y)1.36
EPS Next 2Y16.38%
EPS Next 3Y14.75%
5. Dividend
5.1 Amount
AJG has a yearly dividend return of 0.81%, which is pretty low.
Compared to an average industry Dividend Yield of 3.31, AJG is paying slightly less dividend.
Compared to an average S&P500 Dividend Yield of 2.40, AJG's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.81% |
5.2 History
The dividend of AJG has a limited annual growth rate of 5.46%.
AJG has paid a dividend for at least 10 years, which is a reliable track record.
AJG has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)5.46%
Div Incr Years14
Div Non Decr Years34
5.3 Sustainability
35.97% of the earnings are spent on dividend by AJG. This is a low number and sustainable payout ratio.
AJG's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP35.97%
EPS Next 2Y16.38%
EPS Next 3Y14.75%
316.64
-3.51 (-1.1%)
Chartmill FA Rating
GICS SectorFinancials
GICS IndustryGroupInsurance
GICS IndustryInsurance
Earnings (Last)
Earnings (Next)
Inst Owners91.46%
Inst Owner Change-0.59%
Ins Owners0.59%
Ins Owner Change2.79%
Market Cap81.09B
Analysts75.65
Price Target352.21 (11.23%)
Short Float %1.57%
Short Ratio2.8
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.81% |
Yearly Dividend2.25
Dividend Growth(5Y)5.46%
DP35.97%
Div Incr Years14
Div Non Decr Years34
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2.56%
Min EPS beat(2)1.43%
Max EPS beat(2)3.69%
EPS beat(4)2
Avg EPS beat(4)0.89%
Min EPS beat(4)-1.48%
Max EPS beat(4)3.69%
EPS beat(8)5
Avg EPS beat(8)0.83%
EPS beat(12)8
Avg EPS beat(12)-0.39%
EPS beat(16)12
Avg EPS beat(16)0.64%
Revenue beat(2)0
Avg Revenue beat(2)-1.39%
Min Revenue beat(2)-1.87%
Max Revenue beat(2)-0.9%
Revenue beat(4)0
Avg Revenue beat(4)-1.74%
Min Revenue beat(4)-2.19%
Max Revenue beat(4)-0.9%
Revenue beat(8)1
Avg Revenue beat(8)-0.94%
Revenue beat(12)3
Avg Revenue beat(12)-0.43%
Revenue beat(16)7
Avg Revenue beat(16)2.56%
PT rev (1m)1.34%
PT rev (3m)8.85%
EPS NQ rev (1m)-0.72%
EPS NQ rev (3m)-12.44%
EPS NY rev (1m)0%
EPS NY rev (3m)-4.99%
Revenue NQ rev (1m)1.34%
Revenue NQ rev (3m)-12.23%
Revenue NY rev (1m)1.31%
Revenue NY rev (3m)-7.13%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.68 | ||
| Fwd PE | 23.06 | ||
| P/S | 6.74 | ||
| P/FCF | 32.12 | ||
| P/OCF | 30.42 | ||
| P/B | 3.63 | ||
| P/tB | 15.98 | ||
| EV/EBITDA | 20.21 |
EPS(TTM)10.32
EY3.26%
EPS(NY)13.73
Fwd EY4.34%
FCF(TTM)9.86
FCFY3.11%
OCF(TTM)10.41
OCFY3.29%
SpS46.96
BVpS87.15
TBVpS19.81
PEG (NY)2.93
PEG (5Y)1.36
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 2.1% | ||
| ROE | 6.98% | ||
| ROCE | 7.93% | ||
| ROIC | 6.31% | ||
| ROICexc | 11.45% | ||
| ROICexgc | 71.77% | ||
| OM | 24.43% | ||
| PM (TTM) | 12.96% | ||
| GM | 45.97% | ||
| FCFM | 21% |
ROA(3y)2.35%
ROA(5y)2.69%
ROE(3y)9.48%
ROE(5y)10.47%
ROIC(3y)7.35%
ROIC(5y)7.18%
ROICexc(3y)9.13%
ROICexc(5y)8.37%
ROICexgc(3y)48.09%
ROICexgc(5y)40.27%
ROCE(3y)9.3%
ROCE(5y)9.1%
ROICexcg growth 3Y31.7%
ROICexcg growth 5Y18.43%
ROICexc growth 3Y18.63%
ROICexc growth 5Y11.64%
OM growth 3Y13.45%
OM growth 5Y16.28%
PM growth 3Y4.65%
PM growth 5Y6.37%
GM growth 3Y6.97%
GM growth 5Y6.66%
F-Score6
Asset Turnover0.16
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.56 | ||
| Debt/FCF | 5.18 | ||
| Debt/EBITDA | 3.29 | ||
| Cap/Depr | 15.81% | ||
| Cap/Sales | 1.17% | ||
| Interest Coverage | 7 | ||
| Cash Conversion | 69.66% | ||
| Profit Quality | 161.99% | ||
| Current Ratio | 1.44 | ||
| Quick Ratio | 1.44 | ||
| Altman-Z | 1.6 |
F-Score6
WACC9.18%
ROIC/WACC0.69
Cap/Depr(3y)25.04%
Cap/Depr(5y)23.1%
Cap/Sales(3y)1.76%
Cap/Sales(5y)1.65%
Profit Quality(3y)176.95%
Profit Quality(5y)182.63%
High Growth Momentum
Growth
EPS 1Y (TTM)11.69%
EPS 3Y22.62%
EPS 5Y22.61%
EPS Q2Q%5.16%
EPS Next Y10.46%
EPS Next 2Y16.38%
EPS Next 3Y14.75%
EPS Next 5Y15.95%
Revenue 1Y (TTM)13.21%
Revenue growth 3Y12.07%
Revenue growth 5Y9.94%
Sales Q2Q%15.35%
Revenue Next Year22.24%
Revenue Next 2Y22.58%
Revenue Next 3Y17.32%
Revenue Next 5Y13.92%
EBIT growth 1Y47.14%
EBIT growth 3Y27.14%
EBIT growth 5Y27.83%
EBIT Next Year68.3%
EBIT Next 3Y31.21%
EBIT Next 5Y20.35%
FCF growth 1Y16.76%
FCF growth 3Y15.71%
FCF growth 5Y20.01%
OCF growth 1Y14.04%
OCF growth 3Y14.87%
OCF growth 5Y18.21%