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BRO Outperforms Industry, Trades at Premium: How to Play the Stock

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Key Takeaways

  • BRO leverages strategic acquisitions to capture market opportunities, completing 687 acquisitions since 1993.
  • BRO's diverse business model and operational expertise support a robust liquidity position.
  • BRO has raised dividends for 30 consecutive years, with a five-year (2019-2024) CAGR of 8.7%.

Shares of Brown & Brown, Inc. (BRO - Free Report) have gained 15.7% in the past year, outperforming its industry, the Finance sector and the Zacks S&P 500 composite’s return.

The insurer has a market capitalization of $35.61 billion. The average volume of shares traded in the last three months was 3.1 million.

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Earnings have grown 21.5% in the past five years, better than the industry average of 15.2%. Brown & Brown's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 6.35%.

BRO Shares are Expensive

BRO shares are trading at a premium to the industry. Its price-to-forward 12-months earnings of 24.53X is higher than the industry average of 21.24X. Shares of other insurers like Arthur J. Gallagher & Co. (AJG - Free Report) and Marsh & McLennan Companies, Inc. (MMC - Free Report) are trading at a multiple higher than the industry average, while shares of Willis Towers Watson Public Limited Company (WTW - Free Report) are trading at a discount to the industry average.

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BRO’s Encouraging Growth Projection

The Zacks Consensus Estimate for Brown & Brown’s 2025 earnings per share indicates a year-over-year increase of 8.8%. The consensus estimate for revenues is pegged at $5.20 billion, implying a year-over-year improvement of 8.1%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 9.9% and 7.9%, respectively, from the corresponding 2025 estimates. 
The Zacks Consensus Estimate for 2025 and 2026 moved 0.2% and 1.3% north, respectively, in the last 30 days.

Average Target Price for BRO Suggests Upside

Based on short-term price targets offered by 13 analysts, the Zacks average price target is $120.23 per share. The average suggests a potential 12.6% upside from the last closing price.

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Factors Impacting BRO

Commissions and fees, the main component of the top line, benefit from increasing new business, strong retention and continued rate increases for most lines of coverage. The company met its intermediate annual revenue goal of $4 billion, doubling in the last five years.
The insurance broker continually makes investments in boosting organic growth and margin expansion. It has an industry-leading adjusted EBITDAC margin.

Brown & Brown’s strategic buyouts help it capitalize on growing market opportunities, strengthen its compelling products and service portfolio, expand global reach and accelerate its growth rate. The insurance broker completed 32 acquisitions during the year ended Dec. 31, 2024, and continued to build relationships with many other companies. From 1993 through the first quarter of 2025, Brown & Brown acquired 687 insurance intermediary operations. The Quintes buyout was the largest transaction in 2024. 

Banking on operational expertise, BRO boasts a strong liquidity position with an improving leverage ratio. The strength of its operating model and diversity of businesses ensures strong cash conversion. The company effectively deploys cash into acquisitions, capital expenditure and wealth distribution for shareholders via dividend increases.

BRO has an impressive dividend history. The strong capital position enables Brown & Brown to distribute wealth to shareholders via dividend increases. For dividend payments, the company has increased dividends for the last 30 years at a five-year (2019-2024) CAGR of 8.7%.

End Notes

New business, strong retention, rate increases, strategic buyouts and impressive dividend history poise the company well for growth. Favorable growth estimates and positive analyst sentiment are other positives. A robust capital position over the years reflects its financial flexibility.

However, given its premium valuation, it is better to wait for some more time before taking a call on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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