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AJG Stock Trading at a Discount to Industry at 2.85X: Time to Hold?
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Key Takeaways
AJG is pursuing organic and inorganic growth worldwide, with solid retention and improving renewal premiums.
AJG expects margin stability near 21% in 2025, with Risk Management and Brokerage driving organic growth.
AJG's acquisition pipeline remains strong, boosting international revenue share and supporting dividends.
Arthur J. Gallagher & Co. (AJG - Free Report) shares are trading at a discount compared with the Zacks Brokerage Insurance industry. Its price-to-book value of 2.85X is lower than the industry average of 3.95X, the Finance sector’s 4.28X, and the Zacks S&P 500 Composite’s 8.48X.
The insurer has a market capitalization of $66.32 billion. The average volume of shares traded in the last three months was 1.6 million.
Image Source: Zacks Investment Research
Shares of Brown & Brown, Inc. (BRO - Free Report) are also trading at a discount to the industry average. Aon plc (AON - Free Report) and Willis Towers Watson Public Limited Company (WTW - Free Report) are trading at a multiple higher than the industry average.
AJG is an Outperformer
Shares of Arthur J. Gallagher have lost 10.5% over the past year compared with a 25.8% decline in its industry.
Image Source: Zacks Investment Research
AJG’s Growth Projection Encourages
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2025 earnings per share indicates a year-over-year increase of 6.6%. The consensus estimate for revenues is pegged at $13.81 billion, implying a year-over-year improvement of 21.4%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 24.6% and 20.4%, respectively, from the 2025 estimates.
Earnings of Arthur J. Gallagher grew 20.4% in the last five years, better than the industry average of 15.2%.
Target Price Reflects Potential Upside
Based on short-term price targets offered by 18 analysts, the Zacks average price target is $303.89 per share. The average indicates a potential 19.9% upside from the last closing price.
Factors Impacting AJG
Arthur J. Gallagher insurer remains focused on generating both organic (particularly international) and inorganic growth and is, thus, tapping into growth opportunities worldwide. This, coupled with solid retention and improving renewal premiums across all major geographies and most product lines, bodes well for growth.
Arthur J. Gallagher expects organic growth to improve in the second half of 2025 in the Risk Management segment. Looking forward, AJG expects the fourth quarter and full year adjusted EBITDAC margin to be around 21%. In the fourth quarter of 2025, Risk Management segment rollover revenues are expected to be about $16 million. In the Brokerage segment, AJG expects organic growth of around 5% in the fourth quarter and to finish the year with organic growth above 6%.
AJG’s revenues are geographically diversified with strong domestic and international operations. International contributes about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contributions to its total revenues to trend upward.
Its inorganic growth story is impressive. Since Jan. 1, 2002, AJG has acquired 776 companies, all of which were accounted for using the acquisition method for recording business combinations. Revenue growth rates generally ranged from 5% to 17.5% for 2025 acquisitions. During the third quarter, AJG completed five new mergers, representing around $40 million of estimated annualized revenues. This brings the year-to-date estimated annualized acquired revenues to more than $3.4 billion. Looking at the pipeline, AJG has around 35 term sheets signed or being prepared, representing around $400 million of annualized revenues.
Banking on its capital position, AJG distributes wealth to shareholders through dividend hikes and share repurchases. In the first quarter of 2025, the dividend was raised by 8.3%, witnessing a six-year CAGR (2020-2025) of 7.6%.
However, Arthur J. Gallagher has been experiencing an increase in expenses due to higher compensation and operating expenses that have been eroding margins.
Conclusion
AJG continues to benefit from solid retention, improving renewal premiums, and organic and inorganic growth. The Risk Management and Brokerage segments should continue to witness significant growth. A robust capital position over the years reflects its financial flexibility. Its impressive dividend history, as well as solid growth projections, are other positives.
Image: Bigstock
AJG Stock Trading at a Discount to Industry at 2.85X: Time to Hold?
Key Takeaways
Arthur J. Gallagher & Co. (AJG - Free Report) shares are trading at a discount compared with the Zacks Brokerage Insurance industry. Its price-to-book value of 2.85X is lower than the industry average of 3.95X, the Finance sector’s 4.28X, and the Zacks S&P 500 Composite’s 8.48X.
The insurer has a market capitalization of $66.32 billion. The average volume of shares traded in the last three months was 1.6 million.
Image Source: Zacks Investment Research
Shares of Brown & Brown, Inc. (BRO - Free Report) are also trading at a discount to the industry average. Aon plc (AON - Free Report) and Willis Towers Watson Public Limited Company (WTW - Free Report) are trading at a multiple higher than the industry average.
AJG is an Outperformer
Shares of Arthur J. Gallagher have lost 10.5% over the past year compared with a 25.8% decline in its industry.
Image Source: Zacks Investment Research
AJG’s Growth Projection Encourages
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2025 earnings per share indicates a year-over-year increase of 6.6%. The consensus estimate for revenues is pegged at $13.81 billion, implying a year-over-year improvement of 21.4%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 24.6% and 20.4%, respectively, from the 2025 estimates.
Earnings of Arthur J. Gallagher grew 20.4% in the last five years, better than the industry average of 15.2%.
Target Price Reflects Potential Upside
Based on short-term price targets offered by 18 analysts, the Zacks average price target is $303.89 per share. The average indicates a potential 19.9% upside from the last closing price.
Factors Impacting AJG
Arthur J. Gallagher insurer remains focused on generating both organic (particularly international) and inorganic growth and is, thus, tapping into growth opportunities worldwide. This, coupled with solid retention and improving renewal premiums across all major geographies and most product lines, bodes well for growth.
Arthur J. Gallagher expects organic growth to improve in the second half of 2025 in the Risk Management segment. Looking forward, AJG expects the fourth quarter and full year adjusted EBITDAC margin to be around 21%. In the fourth quarter of 2025, Risk Management segment rollover revenues are expected to be about $16 million. In the Brokerage segment, AJG expects organic growth of around 5% in the fourth quarter and to finish the year with organic growth above 6%.
AJG’s revenues are geographically diversified with strong domestic and international operations. International contributes about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contributions to its total revenues to trend upward.
Its inorganic growth story is impressive. Since Jan. 1, 2002, AJG has acquired 776 companies, all of which were accounted for using the acquisition method for recording business combinations. Revenue growth rates generally ranged from 5% to 17.5% for 2025 acquisitions. During the third quarter, AJG completed five new mergers, representing around $40 million of estimated annualized revenues. This brings the year-to-date estimated annualized acquired revenues to more than $3.4 billion. Looking at the pipeline, AJG has around 35 term sheets signed or being prepared, representing around $400 million of annualized revenues.
Banking on its capital position, AJG distributes wealth to shareholders through dividend hikes and share repurchases. In the first quarter of 2025, the dividend was raised by 8.3%, witnessing a six-year CAGR (2020-2025) of 7.6%.
However, Arthur J. Gallagher has been experiencing an increase in expenses due to higher compensation and operating expenses that have been eroding margins.
Conclusion
AJG continues to benefit from solid retention, improving renewal premiums, and organic and inorganic growth. The Risk Management and Brokerage segments should continue to witness significant growth. A robust capital position over the years reflects its financial flexibility. Its impressive dividend history, as well as solid growth projections, are other positives.
Given the escalating expenses, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.