AJG Stock Trading at a Discount to Industry at 2.85X: Time to Hold?

Core Insights - Arthur J. Gallagher & Co. (AJG) shares are trading at a discount compared to the Zacks Brokerage Insurance industry, with a price-to-book value of 2.85X, lower than the industry average of 3.95X, the Finance sector's 4.28X, and the Zacks S&P 500 Composite's 8.48X [1] - AJG has a market capitalization of $66.32 billion, with an average trading volume of 1.6 million shares over the last three months [1] Performance Comparison - AJG shares have declined by 10.5% over the past year, outperforming the industry, which saw a decline of 25.8% [3] Growth Projections - The Zacks Consensus Estimate for AJG's 2025 earnings per share indicates a year-over-year increase of 6.6%, with revenues projected at $13.81 billion, reflecting a 21.4% year-over-year improvement [4] - For 2026, earnings per share and revenues are expected to increase by 24.6% and 20.4%, respectively, from the 2025 estimates [4] - AJG's earnings grew by 20.4% over the last five years, surpassing the industry average of 15.2% [5] Growth Strategy - AJG is pursuing both organic and inorganic growth globally, with strong retention and improving renewal premiums [8] - The company expects margin stability near 21% in 2025, driven by Risk Management and Brokerage segments [8] - AJG's acquisition pipeline remains robust, enhancing international revenue share and supporting dividends [8] Revenue and Market Position - AJG's revenues are geographically diversified, with international operations contributing about one-third of total revenues [12] - Since January 1, 2002, AJG has acquired 776 companies, with revenue growth rates for 2025 acquisitions ranging from 5% to 17.5% [13] - In the third quarter, AJG completed five new mergers, contributing approximately $40 million in estimated annualized revenues, bringing the year-to-date total to over $3.4 billion [13] Shareholder Returns - AJG has a strong capital position, allowing for dividend hikes and share repurchases, with an 8.3% increase in dividends in the first quarter of 2025 [14] - The company has experienced a six-year CAGR of 7.6% in dividends from 2020 to 2025 [14] Conclusion - AJG benefits from solid retention, improving renewal premiums, and both organic and inorganic growth, particularly in the Risk Management and Brokerage segments [15] - The company's strong capital position and impressive dividend history, along with solid growth projections, are positive indicators for future performance [15]