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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Arthur J. Gallagher & Co. (XNYS:AJG) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
AJG
Name:
ARTHUR J. GALLAGHER & CO. (XNYS:AJG)
Sector:
396.90M
Industry:
Insurance Brokers
CEO:
Mr. J. Patrick Gallagher
Total Employees:
39,000
Our Technological Advancement Rating
Our Rating:
B
Technological advancement compared to industry is -10.21% lower
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF ARTHUR J. GALLAGHER & CO.(AJG) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND INSURANCE BROKERS INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
180.47
One Month Price Target:
$181.15
Six Month Price Target :
$184.54
Likely Price in One Year's Time:
Ticker:
$188.62
Likely Trading Range Today Under (Normal Volatility)
$180.09
Price Upper limit ($) :
$181.25
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$173.64
This week:
$165.19
This month :
$149.91
Other Primary facts
Market Cap:
38.05B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
210.34M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
13.23%
-15.24%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$212.13
$197.28
$148.81
$163.66
Medium risk (<10%) entry points
Buy Call
Sell Call
$192.44
Buy Put:
Sell Put:
$189.27
$168.46
$171.67
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
AJG
Sharpe Ratio:
5.46%
Comparison:
AJG, is amongst the top 20% stocks with highest risk-adjusted returns
Sharpe ratio is 135.15% higher than the industry
& ratio is 139.55% higher than the market/S&P 500 average
Average Returns/Yield of
AJG
Daily returns:
0.11%
Weekly returns:
0.56%
Monthly returns:
2.25%
Yearly returns:
6.97%
Comparison of returns:
Average annual returns/yield (last 3 years) is 287.18% above industry average
Classification:
AJG, is amongst the top 20% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.22
Statistical test of Returns:
AJG has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
1.90%
Weekly Volatility:
4.25%
Monthly Volatility:
8.49%
Yearly Volatility:
29.41%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
0.49%
Volatility in last five trading days has been -74.18% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-3.79%
Weekly VaR:
-8.47%
Monthly VaR:
-16.93%
How Much Can the price of
AJG
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-14%
Worst case (decline):
-58.66%
This translates to price declining to:
$155.78
This translates to price declining to:
$74.60
Severe Crash Probability
Risk of crash in next 6/12 months: Very high (>70%)
What is Value at Risk (VaR)?
Risk Fundamentals
AJG is a 19.52% riskier investment compared to the market/S&P 500 & is 2.39% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -25.70% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
AJG
Beta in relation to market/S&P 500--0.67
Expected beta in 1 year's time:
0.705
Expected beta in 3 year's time:
0.997
Unlevered (debt free) Beta:
0.416
Beta in relation to Nasdaq (XNAS):
0.688
Beta in relation to all global stocks::
0.672
Beta Comparison & Analysis
Beta of competitors/peers::
1.235
Beta is -45.59% lower than peers
Average Industry Beta:
0.675
Beta is -0.44% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
6.35%
Sustainable growth rate is -48.49% below industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.192
Alpha is -2508.96% below industry average alpha yield
Alpha is 1225% higher than market/& is unsustainably high
Analysis of Cost of Capital of
AJG
Equity cost of capital:
0.078
Equity cost of capital is -0.26% below industry mean WACC
Unlevered (without debt) cost of capital:
4.80%
Before-tax cost of debt:
3.71%
After-tax cost of debt:
2.93%
Overall debt rating:
Upper medium A grade (third highest grade),CO8<=0.0429,"Medium BBB grade (Fourth highest grade)
Weighted average cost of capital (WACC):
2.93%
WACC is 10.63% above industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$40.24
Revenue growth rate per share of (3Y):
4.2
Annual revenue growth rate is -91.75% below industry average
EPS:
$4.56
Expected Annual growth rate of EPS (3Y):
6.72%
Expected future EPS growth rate is -60.26% lower than the Insurance Brokers industry
Free cash flow (FCF) per share:
$8.12
Balance sheet equity growth per share: 24.27%
Equity growth rate per share is -64129.10% lower than the industry
Debt per share
$28.97
EBITDA per share
$9.00
Valuation Analysis Today of
AJG
P/E Ratio:
36.39
P/E Ratio of Competitors/Peers:
7.79
P/E ratio is 366.83% higher than main peers & is -33.15% lower than the industry
Stock price/value with industry average P/E ratio: $248.22
AJG is -27.29% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $48.91
Present value of the expected future dividends only: $33.62
P/S (Price to Sales ratio):
4.49
Price to sales ratio is 41.18% above the industry mean
P/B (Price to book value ratio):
4.2
Price to free cash flow: 22.23
-
Net income growth rate (3Y):
36.95%
Net income growth rate is -101.30% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 11.08%
Dividend yeild: 1.10%
Previous Dividend: $0.51
Previous adjusted dividend: $0.51
Previous Dividend: $1.98
Expected next dividend best case: $0.53
Expected next dividend worst case: $0.49
Average dividend payment (long-term): $0.47
Average dividend increase/decrease (growth rate) % per period: 1.76%
Expected next dividend payment date: 15/09/2022
Expected next dividend record date: 09/01/2022
-
Previous dividend payment date: 17/06/2022
Previous dividend record date: 06/03/2022
-
Dividend History:
2022-06-02--$0.51
2021-12-02--$0.48
2021-06-03--$0.48
2022-03-03--$0.51
2021-09-02--$0.48
2021-03-04--$0.48
Dividend growth rate is -112.88% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
67.79%
Net debt to equity ratio:
66.62%
Debt to assets ratio:
14.12%
Net debt to assets ratio:
13.88%
Debt-to-asset ratio is -71.22% below industry average
Ability to repay debt:
Interest coverage ratio:
7.82
Interest coverage ratio is 32.80% more than industry average
Looking forward:
Debt growth rate:
35.50%
Annual debt growth is -97% lower than industry average debt growth rate
Debt repayment rate in last quarter: 7.40%
Analysis of Key Statistics
Correlation of price movement with the market:
0.763
Statistical significance of correlation:
AJG has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.616
Stock price is 23.87% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.616
Correlation of price movement with Nasdaq (^IXIC):
0.036
Covariance of price movement with the market:
0.04
Kurtosis
12.611
Returns have severe fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are considerably more likely, compared to assets with normally distributed returns
Skewness of returns:
-0.779
Returns are left (negative) skewed; mean returns are lower than median and mode returns
Fundamental Analysis & Dupont Analysis of
AJG
Gross Profit Margin Ratio:
150%
Operating Profit Margin Ratio:
17.39%
Operating profit margin is 125.08% higher than the industry
Net Profit Margin Ratio:
150%
Effective Tax Rate:
9.42%
Effective tax rate is -37.88% lower than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
10.72%
Return on equity (ROE) is -17.80% lower than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
2.23%
Return on assets (ROA) is -59.64% lower than the industry
Financial Leverage:
1.2x
Current Ratio:
1.05
Current ratio is -54.35% below industry average
Cash Conversion Cycle (days):
-442.5
Cash conversion cycle is -193.42% below industry average
The remaining useful life of property plant & equipment is: 4.1 years
Stock based compensation to net income ratio:
0.25%
In-depth Efficiency Analysis
Revenue generated per employee:
217.0K
Each employee generates -16% less revenue than industry average revenue per employee
EBITDA generated per employee:
48.5K
Each employee generates 29% more EBITDA than industry average revenue per employee
Profit generated per employee:
24.7K
Each employee generates 20% more net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
10.2K
Each employee generates 108% more free cash flow than industry average revenue per employee
Assets/Capital per employee
401.1K
Each employee generates 108% more free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
AJG
MAGELLAN FINANCIAL GROUP LTD (XASX:MFG)
Banco Bradesco SA (XNYS:BBD)
SUN LIFE FINANCIAL INC (XNYS:SLF)
ALL
FIRST REPUBLIC BANK (XNYS:FRC)
DISCOVER FINANCIAL SERVICES (XNYS:DFS)
STATE STREET CORPORATION (XNYS:STT)
Banco Bradesco SA (XNYS:BBDO)
NATWEST GROUP PLC (XNYS:NWG)
Current Analyst Ratings
Strong buy�13%
Buy�17%
Hold�33%
Sell�4%
Strong sell�0%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
8.46B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
5.25B
3.21B
-
-
-
-
1.74B
1.74B
-
241.90M
582.80M
1.89B
1.47B
963.40M
1.10B
104.00M
963.40M
Statement of Cash Flow
Date:
Period:
159.80M
Differed Income Tax :
28.10M
Stock Based Compensation :
2.40M
Change in Working Capital :
- 201000.00K
Accounts Receivables:
- 9827300.00K
Other Working Capital:
163.30M
Other Non-Cash Items:
6.20M
Net Cash Provided by Operating Activities:
434.60M
Investments in PP&E:
-
Net Acquisitions:
- 120700.00K
Purchases of Investments:
- 100.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
528.60M
-
528.60M
22.17B
-
4.82B
27.52B
887.30M
8.73B
3.88B
-
1.17B
980.20M
15.64B
-
43.16B
23.18B
423.40M
-
577.80M
1.97B
26.14B
6.09B
1.81B
7.97B
-
34.12B
210.10M
3.21B
- 665700.0K
6.23B
March 31, 2022 at 6:00:00 AM
6.99B
8.99B
43.11B
-
6.52B
6.0B
-
26.50M
- 94300.00K
- 487100.00K
45.90M
-
- 106700.00K
347.60M
- 200300.00K
32.40M
172.40M
4.64B
4.47B
434.60M
- 37700.00K
396.90M
Our Proprietary Portfolio Rating
Our Rating:
B
Price Forecast/Expected Price in Next 5 Years of
AJG
2023
2024
2025
2026
2027
$171.64
$179.39
$187.49
$195.96
$204.81