AJG  Arthur J. Gallagher & Co.

Exchange

NYSE

Sector

Finance

Industry

Specialty Insurers

Market Cap.

10.05B

Vuru Grade

46.97/100

Current Price

$56.26
+0.11 (+0.20%)

Growth Price

$42.75
Overvalued by 24.01%

Company Metrics

  • P/E 24.25
  • P/S 1.81
  • P/B 2.78
  • EPS 2.32
  • Cash ROIC 6.28%
  • Cash Ratio 0.12
  • Dividend 1.56 / 2.74%
  • Avg. Vol. 1.08M
  • Shares 178.63M
  • Market Cap. 10.05B

Company Description

Arthur J. Gallagher & Co. and its subsidiaries provide insurance brokerage and risk management services to various commercial, industrial, institutional, and governmental organizations. It operates in two segments, Brokerage and Risk Management. The Brokerage segment primarily consists of retail and wholesale brokerage operations. Its retail brokerage operations negotiate and place property/casual... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

BRIEF-ARTHUR J. GALLAGHER & CO ACQUIRES KELLY FINANCIAL INC
Reuters - Feb 21, 2017
Reuters is the news and media division of Thomson Reuters. Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news ...
Thirty-one Arthur J. Gallagher & Co. Professionals Named Power Brokers® by ...
Yahoo Finance - 12 hours ago
22, 2017 /PRNewswire/ -- Arthur J. Gallagher & Co. (AJG) is proud to announce that 31 of its retail insurance brokers and benefits consultants have been recognized as Power Brokers┬« by Risk & Insurance┬« magazine. Power Brokers are selected annually ...
Arthur J. Gallagher (AJG) Adds Kelly Financial to Portfolio
Zacks.com - 15 hours ago
Arthur J. Gallagher & Co. (AJG - Free Report) recently declared that it has purchased Kelly Financial, Inc. to enhance and extend its retirement consulting services in the North-central region of the U.S.
Arthur J. Gallagher & Co. Acquires Kelly Financial, Inc. - Yahoo Finance
Today Analysts Focus on Spirit Airlines, Inc. (SAVE), Arthur J. Gallagher & Co ... - StockNewsJournal
Arthur J. Gallagher & Co. Acquires Lewis & Associates Insurance Brokers, Inc.
PR Newswire (press release) - Feb 7, 2017
Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 33 countries and offers client service capabilities in more than 150 countries around the world ...
Arthur J. Gallagher & Co. (AJG) Director Kay W. Mccurdy Sells 2330 Shares - The Cerbat Gem
The Arthur J. Gallagher & Co. (AJG) Stake Raised by Sigma Investment ... - DailyQuint
BRIEF-Arthur J. Gallagher & Co acquires Eagle Insurance Agency Llc
Reuters - Jan 30, 2017
TOKYO, Feb 17 Japan's Nikkei share average dropped on Friday morning with the market wary of a stronger yen and financials weakened as U.S.
Arthur J. Gallagher & Co. Acquires The Presidio Group, Inc.
PR Newswire (press release) - Jan 31, 2017
Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 33 countries and offers client service capabilities in more than 150 countries around the world ...
Arthur J. Gallagher & Co. Acquires Eagle Insurance Agency in New York - Insurance Journal
The Arthur J. Gallagher & Co. (AJG) Set to Announce Quarterly Earnings on Thursday - DailyQuint
Arthur J. Gallagher & Co. Acquires Construction Risk Solutions, LLC
PR Newswire (press release) - Jan 9, 2017
Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 33 countries and offers client service capabilities in more than 150 countries around the world ...
Arthur J. Gallagher & Co. Announces Leadership Promotions in Employee Benefits ...
PR Newswire (press release) - Jan 11, 2017
ITASCA, Ill., Jan. 11, 2017 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today announced two leadership promotions in its employee benefit division.
Equities Analysts Issue Forecasts for Arthur J. Gallagher & Co.'s FY2019 ... - Marea Informative
Arthur J. Gallagher & Co. (NYSE:AJG) earnings reaction history - The Independent Republic
Arthur J. Gallagher & Co. Acquires Eagle Insurance Agency, LLC
Yahoo Finance - Jan 30, 2017
Founder Timothy George and his associates will continue to operate from their current location as a satellite of Arthur J. Gallagher & Co.'s Albany office under the direction of Douglas Brown, head of Gallagher's Northeastern retail property/casualty ...
Arthur J. Gallagher & Co. (AJG) Stake Raised by Sigma Investment Counselors Inc. - The Cerbat Gem
The EP Wealth Advisors Inc. Has $570000 Position in Arthur J. Gallagher & Co ... - DailyQuint
Arthur J. Gallagher & Co. Acquires Adco General Corporation
PR Newswire (press release) - Jan 19, 2017
ITASCA, Ill., Jan. 19, 2017 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today announced the acquisition of Adco General Corporation (Adco), headquartered in Denver, Colorado.
Arthur J. Gallagher Keeps Serial Deal Pace (AJG) - Investopedia
Arthur J. Gallagher & Co. (AJG) Position Raised by Palouse Capital Management Inc. - Sports Perspectives
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for AJG to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate AJG's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$56.26 Current Price

$42.75 Growth Price (DCF)

Overvalued by 24.01%


Growth Rate Assumed by Market: 22.25%


Future Free Cash Flow Growth Rate: 11.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$54.38 Book Price

Fairly valued


Poor Cash Return on Invested Capital over the past 5 years

AJG has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

AJG has only created $6.28 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 292.00M - 320.80M 553.60M 404.30M
divided by
Invested Capital 2.69B 3.28B 6.05B 6.24B 6.33B
Cash ROIC 10.87% - 5.30% 8.87% 6.38%

Satisfactory Return on Equity over the past 5 years

AJG has generated adequate returns with capital that shareholders have invested. This is sufficient and implies that management performance has been good.

AJG has generated $11.42 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 195.00M 268.60M 303.40M 389.10M 445.00M
divided by
Stockholders' Equity 1.66B 2.09B 3.23B 3.64B 3.60B
Return on Equity 11.76% 12.88% 9.39% 10.69% 12.37%

Excellent Business Performance over the past 10 years

AJG has been able to maintain profitability in good times and bad. This could mean AJG has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

AJG has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow 211.60M 128.60M 188.00M 206.40M 243.10M 292.00M - 320.80M 553.60M 404.30M

Weak Balance Sheet

AJG's financial position is not ideal. The key is to check whether AJG is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 263.40M 194.60M 206.00M 249.80M 291.20M 302.10M 298.10M 314.40M 480.40M 545.50M
Current Assets 2.28B 1.70B 1.54B 1.73B 2.20B 2.43B 2.88B 3.81B 4.34B 4.42B
Total Assets 3.56B 3.27B 3.25B 3.60B 4.48B 5.35B 6.86B 10.01B 10.91B 11.49B
Current Liabilities 2.23B 1.86B 1.47B 1.58B 2.07B 2.36B 3.28B 3.64B 4.19B 4.61B
Total Liabilities 2.84B 2.53B 2.36B 2.49B 3.24B 3.69B 4.78B 6.78B 7.28B 7.89B
Stockholder' Equity 715.50M 738.50M 892.90M 1.11B 1.24B 1.66B 2.09B 3.23B 3.64B 3.60B
Current Ratio 1.02 0.92 1.04 1.09 1.06 1.03 0.88 1.05 1.03 0.96
TL-to-TA 0.80 0.77 0.73 0.69 0.72 0.69 0.70 0.68 0.67 0.69

Consistent Reinvestment of Profits over the past 10 years

AJG has consistently retained profits. This may put AJG in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, AJG can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 495.90M 452.00M 450.30M 488.30M 482.90M 510.40M 596.40M 676.00M 774.50M 916.40M
Retained Earnings Growth - -8.85% -0.38% 8.44% -1.11% 5.69% 16.85% 13.35% 14.57% 18.32%

Competitive Industry over the past 10 years

AJG is likely operating in an industry with medium to low barriers to entry. This may mean that AJG doesn't have a characteristic that's hard to replicate, such as exclusive distribution, branding or the ability to keep costs low. If Gross Margins are at least satisfactory, it's likely that AJG invests heavily in R&D and Sales, General & Administrative expenses.

Only $7.48 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 138.80M 77.30M 128.60M 174.10M 144.10M 195.00M 268.60M 303.40M 389.10M 445.00M
divided by
Revenue 1.62B 1.61B 1.73B 1.86B 2.13B 2.52B 3.18B 4.63B 5.39B 5.59B
Net Profit Margin 8.55% 4.80% 7.44% 9.34% 6.75% 7.74% 8.45% 6.56% 7.22% 7.95%

Varying Pricing Power over the past 10 years

AJG has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. However, there is a substantial variation in their Gross Profit Margins from year-to-year, which indicates inconsistent performance. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$56.68 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 1.19B 1.22B 1.41B 1.45B 2.13B 915.30M 1.06B 1.40B 1.61B 1.65B
divided by
Revenue 1.62B 1.61B 1.73B 1.86B 2.13B 2.52B 3.18B 4.63B 5.39B 5.59B
Gross Margin 73.08% 75.73% 81.25% 77.55% 100.00% 36.32% 33.25% 30.26% 29.89% 29.44%

Medium Capital Intensity over the past 10 years

AJG has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

28.75% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 40.70M 32.00M 23.50M 25.40M 40.00M 51.00M - 81.50M 99.00M 217.80M
divided by
Net Income 138.80M 77.30M 128.60M 174.10M 144.10M 195.00M 268.60M 303.40M 389.10M 445.00M
Capital Expenditure Ratio 29.32% 41.40% 18.27% 14.59% 27.76% 26.15% - 26.86% 25.44% 48.94%

Very Strong Dividend History over the past 10 years

AJG has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests AJG is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid 118.80M 118.50M 127.90M 133.50M 145.80M 204.40M 182.60M 223.10M 297.40M 272.20M
divided by
Shares Outstanding 97.06M 94.20M 100.50M 105.10M 112.50M 122.50M 130.50M 154.30M 173.20M 178.40M
Dividend Paid Per Share 1.22 1.26 1.27 1.27 1.30 1.67 1.40 1.45 1.72 1.53
Price at Year End 19.80 21.80 20.84 27.91 33.44 34.47 46.67 47.84 41.38 51.96
Dividend Yield 6.18% 5.77% 6.11% 4.55% 3.88% 4.84% 3.00% 3.02% 4.15% 2.94%

History of Stock Buybacks over the past 10 years

AJG has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 97.06M 94.20M 100.50M 105.10M 112.50M 122.50M 130.50M 154.30M 173.20M 178.40M
Stock Bought Back - 3.04% -6.27% -4.38% -6.58% -8.16% -6.13% -15.42% -10.91% -2.91%
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