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Arthur J. Gallagher & Co. (AJG) Stock

Arthur J. Gallagher & Co. Stock Details, Movements and Public Alerts

Arthur J. Gallagher & Co. (AJG): The $60 Billion Insurance Brokerage Empire Thriving on M&A

Under CEO J. Patrick Gallagher Jr.'s leadership—third generation of family management—Arthur J. Gallagher has transformed from a regional broker into a global insurance powerhouse. The company's strategy combines organic growth (4-5% annually) with aggressive M&A, completing over 700 acquisitions since 2002. AJG operates through two divisions: Risk Management Services (traditional brokerage) and Corporate & Professional Services (employee benefits consulting, HR consulting). With property/casualty insurance rates rising 6-8% annually since 2020, J. Patrick Gallagher has positioned AJG to capture premium inflation without capital-intensive underwriting operations. The forward P/E of 22.27 reflects strong growth expectations, though the 0.82% dividend yield suggests capital is prioritized for acquisitions over shareholder distributions.

52-Week Range

$349.78 - $261.04

-25.21% from high · +0.21% from low

Avg Daily Volume

2,709,183

Latest volume

Fundamentals

Valuation Metrics

P/E Ratio (TTM)

46.72

Above market average

Forward P/E

22.27

Earnings expected to grow

PEG Ratio

0.99

Potentially undervalued

Price to Book

3.39

EV/EBITDA

21.99

EPS (TTM)

$6.63

Price to Sales

6.87

Beta

0.72

Less volatile than market

How is AJG valued relative to its earnings and growth?
Arthur J. Gallagher & Co. trades at a P/E ratio of 46.72, which is above the market average of approximately 20. This premium valuation suggests investors expect above-average growth or the company has competitive advantages justifying the higher multiple. Looking ahead, the forward P/E of 22.27 is lower than the current P/E, indicating analysts expect earnings to grow over the next year. The PEG ratio of 0.99 suggests the stock may be undervalued relative to its growth rate.
What is AJG's risk profile compared to the market?
With a beta of 0.72, Arthur J. Gallagher & Co. is less volatile than the overall market. This means when the market moves up or down by 10%, this stock typically moves less than 10% in the same direction. Lower beta stocks are often preferred by conservative investors seeking stability. The price-to-book ratio of 3.39 shows investors value the company above its book value, which often reflects intangible assets or growth prospects.

Performance & Growth

Profit Margin

14.20%

Operating Margin

17.90%

EBITDA

$3.28B

Return on Equity

9.51%

Return on Assets

2.11%

Revenue Growth (YoY)

11.70%

Earnings Growth (YoY)

10.20%

How profitable and efficient is AJG's business model?
Arthur J. Gallagher & Co. achieves a profit margin of 14.20%, meaning it retains $14.20 from every $100 in revenue after all expenses. This represents a solid margin typical of well-run businesses, showing the company can effectively balance revenue generation with cost control. The operating margin of 17.90% reveals how efficiently the company runs its core business operations before interest and taxes. With ROE at 9.51% and ROA at 2.11%, the company achieves moderate returns on invested capital.
What are AJG's recent growth trends?
Arthur J. Gallagher & Co.'s revenue grew by 11.70% year-over-year, showing steady progress in growing the business. This positive trajectory indicates the company maintains competitive positioning in its markets. Earnings increased by 10.20% year-over-year, reflecting the bottom-line impact of business performance. These growth metrics should be evaluated against INSURANCE BROKERS industry averages for proper context.

Dividend Information

Dividend Per Share

$2.50

Dividend Yield

0.82%

Ex-Dividend Date

Sep 5, 2025

Dividend Date

Sep 19, 2025

What dividend income can investors expect from AJG?
Arthur J. Gallagher & Co. offers a dividend yield of 0.82%, paying $2.50 per share annually. This modest yield below 2% suggests the company prioritizes growth investments over current income. While the dividend provides some return, investors are likely attracted more by capital appreciation potential than income generation. To receive the next dividend, shares must be purchased before the ex-dividend date of Sep 5, 2025.
How reliable is AJG's dividend for long-term investors?
The dividend sustainability can be assessed through the payout ratio - Arthur J. Gallagher & Co. pays $2.50 per share in dividends against earnings of $6.63 per share, resulting in a payout ratio of 37.71%. This balanced payout between 30-60% suggests a sustainable dividend policy that allows both shareholder returns and business reinvestment. The dividend appears well-covered by earnings. The next dividend payment is scheduled for Sep 19, 2025.

Company Size & Market

Market Cap

$79.4B

Revenue (TTM)

$11.55B

Revenue/Share (TTM)

$48.29

Shares Outstanding

256.36M

Book Value/Share

$89.79

Asset Type

Common Stock

What is AJG's market capitalization and position?
Arthur J. Gallagher & Co. has a market capitalization of $79.4B, classifying it as a large-cap stock ($10B-$200B). Large-caps are typically industry leaders with established business models, offering a balance of stability and growth potential. They often provide dividend income and are core holdings in institutional portfolios. With 256.36M shares outstanding, the company's ownership is relatively concentrated. As a participant in the INSURANCE BROKERS industry, it competes with other firms in this sector.
How does AJG's price compare to its book value?
Arthur J. Gallagher & Co.'s book value per share is $89.79, while the current stock price is $261.60, resulting in a price-to-book (P/B) ratio of 2.91. This reasonable premium to book value suggests the market values the company's earnings power and intangible assets appropriately. Most profitable companies trade between 1-3x book value. As a common stock, this represents equity ownership with voting rights.

Analyst Ratings

Analyst Target Price

$339.67

29.84% upside potential

Analyst Recommendations

Strong Buy

1

Buy

8

Hold

7

Sell

0

Strong Sell

1

How reliable are analyst predictions for AJG?
17 analysts cover AJG with 53% recommending buy/strong buy ratings. Analyst predictions have mixed reliability - studies show consensus rarely beats market returns consistently. The mixed views reflect uncertainty about the outlook. The consensus target of $339.67 implies 29.8% upside, but targets are often adjusted to follow price moves rather than predict them.
What is the Wall Street consensus on AJG?
Current analyst recommendations:1 Strong Buy, 8 Buy, 7 Hold, 01 Strong Sell. The bullish tilt suggests optimism about future prospects, though investors should conduct independent research.Remember that analyst opinions often lag price movements and can be influenced by investment banking relationships.

Fundamentals last updated: Oct 1, 2025, 02:58 AM

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Arthur J. Gallagher & Co. (AJG) Stock Analysis 2025: Complete Investment Guide

The Family-Run Brokerage Giant Capitalizing on Insurance Price Inflation

When J. Patrick Gallagher Jr. took over as CEO in 2007, Arthur J. Gallagher & Co. was already a century-old institution founded by his grandfather in 1927. But under his leadership, the company has evolved from a respected regional player into the fourth-largest global insurance broker—behind only Marsh McLennan, Aon, and Willis Towers Watson. The formula is deceptively simple: act as intermediary between businesses seeking insurance and carriers willing to underwrite risk, earning commissions on every premium dollar placed.

What makes J. Patrick Gallagher's approach distinctive is the aggressive M&A strategy that has seen AJG complete over 700 acquisitions since 2002, systematically rolling up smaller regional brokers while expanding capabilities in niche areas like cyber insurance, environmental liability, and professional services consulting. Unlike insurers who face catastrophic loss exposure and capital requirements, brokers like Gallagher collect recurring commission revenues with asset-light operations and minimal credit risk.

Business Model & Competitive Moat

Arthur J. Gallagher operates through two primary segments generating differentiated revenue streams:

  • •Risk Management Services (65% of revenue): Traditional property/casualty insurance brokerage serving commercial clients from small businesses to Fortune 500 companies. Specialties include construction, real estate, healthcare, and manufacturing verticals.
  • •Corporate & Professional Services (35% of revenue): Employee benefits consulting, HR outsourcing, retirement planning, and compensation consulting. Serves mid-market companies seeking bundled benefits administration and compliance support.

The business model generates recurring revenues with high client retention (typically 90%+ annually) because switching brokers involves relationship disruption and knowledge transfer costs. Commissions are structured as percentage of premium (10-15% for commercial lines, 3-6% for large accounts), meaning Gallagher benefits automatically when insurance rates rise—even without adding new clients. The "hard market" since 2020 (property/casualty rates up 6-8% annually) has been a major tailwind, boosting organic revenue growth to 8-10% versus historic 4-5%.

The competitive moat derives from several factors: deep client relationships built over decades, specialized industry expertise that's difficult to replicate, proprietary risk management software and data analytics, and scale advantages in carrier negotiations (larger brokers secure better terms and access to specialty markets).

Financial Performance

  • •Revenue Growth: Consistent 7-10% organic growth since 2020, supplemented by 4-6% from acquisitions, delivering total growth of 11-16% annually
  • •Margin Expansion: EBITDA margins improving from 28% (2020) to 32%+ (2025) through operational efficiency and technology investments
  • •Free Cash Flow Generation: Converting 90%+ of net income to cash flow given minimal capital requirements, funding both M&A and shareholder returns
  • •Valuation Premium: P/E of 46.72 and forward P/E of 22.27 reflect quality and growth, though above historical averages of 20-25x suggesting limited multiple expansion
  • •Dividend Policy: 0.82% yield with 13 consecutive annual increases, though payout ratio remains modest at 20-25% as capital prioritized for acquisitions

The financial profile resembles a high-quality compounder: predictable recurring revenues, margin expansion, minimal capital needs, and disciplined capital allocation balancing M&A with shareholder returns.

Growth Catalysts

  • •Hard Insurance Market Persistence: Property/casualty rates expected to remain elevated through 2026 as carriers rebuild capital and adjust for climate risk, inflation, and social inflation (rising jury awards)
  • •M&A Pipeline: Fragmented broker industry (top 5 control only 40% market share) provides abundant acquisition targets; AJG targets 30-50 deals annually
  • •Cyber Insurance Growth: Rapidly expanding cyber insurance market (25%+ annual growth) where Gallagher has built specialized capabilities and carrier relationships
  • •International Expansion: International operations represent 30% of revenues with opportunity to replicate U.S. model in underpenetrated markets
  • •Technology Differentiation: Investments in Gallagher Bassett (claims administration), Gallagher Drive (telematics), and proprietary risk analytics create sticky client relationships

Risks & Challenges

  • •Insurance Rate Cycle Reversal: If property/casualty rates flatten or decline ("soft market"), organic growth would slow to 3-5% historical norms, pressuring valuation multiples
  • •M&A Execution Risk: Aggressive acquisition pace (30-50 deals annually) creates integration challenges, cultural fit issues, and risk of overpaying at cycle peaks
  • •Economic Sensitivity: Recession reduces new business formation and causes existing clients to reduce coverage or seek lower-cost alternatives
  • •Competition Intensification: Larger competitors (Marsh McLennan, Aon) have greater scale and resources; smaller specialists may offer better service in niches
  • •Disintermediation Threats: InsurTech startups and direct-to-carrier platforms could reduce broker value proposition for commoditized coverages
  • •Valuation Risk: At 46.72x trailing earnings and 22.27x forward earnings, limited margin for disappointment if growth slows or multiple compresses to historical averages

Competitive Landscape

The global insurance brokerage industry is consolidated at the top but highly fragmented below. The "Big Three" competitors are Marsh McLennan (MMC, $120B market cap), Aon (AON, $85B market cap), and Willis Towers Watson (WTW, $30B market cap). Arthur J. Gallagher ranks fourth at approximately $60 billion market cap, followed by Brown & Brown (BRO) and Hub International (private).

J. Patrick Gallagher has differentiated through culture (decentralized structure empowering local brokers) and M&A discipline (targeting 13-15x EBITDA multiples, walking away when valuations exceed thresholds). Marsh McLennan leads in Fortune 500 accounts and consulting services, while Aon dominates reinsurance brokerage. Gallagher's sweet spot is middle-market companies ($50M-$2B revenues) where relationships matter more than global scale. The company also competes with thousands of regional brokers, many of which become acquisition targets as founders seek succession solutions.

Who Is This Stock Suitable For?

Perfect For

  • ✓Growth investors seeking exposure to financial services without capital intensity or credit risk
  • ✓Long-term investors (5+ years) comfortable with premium valuations for quality compounders
  • ✓Dividend growth investors accepting modest 0.82% yield in exchange for 10%+ annual payout increases
  • ✓Investors seeking recession-resistant businesses with predictable recurring revenues

Less Suitable For

  • ✗Value investors seeking single-digit P/E ratios or deep discounts to intrinsic value
  • ✗Income-focused investors requiring 2%+ dividend yields for portfolio income needs
  • ✗Short-term traders (modest volatility and steady appreciation limit trading opportunities)
  • ✗Investors concerned about M&A execution risks or insurance cycle sensitivity

Investment Thesis

Arthur J. Gallagher represents a high-quality financial services compounder benefiting from structural tailwinds (hard insurance market, M&A consolidation) and exceptional management under J. Patrick Gallagher Jr.'s leadership. The business model—asset-light, recurring revenues, minimal credit risk, high client retention—generates predictable cash flows that fund both organic growth and disciplined M&A. The company has demonstrated consistent execution over decades, maintaining cultural strength despite massive scale increases.

However, investors must weigh quality against valuation. At 46.72x trailing earnings and 22.27x forward earnings, AJG trades at significant premiums to historical averages and broader market multiples. The valuation assumes continued hard market conditions, successful M&A execution at reasonable prices, and margin expansion through operating leverage. Any disappointment—soft insurance market, M&A missteps, economic downturn—could trigger multiple compression. This is appropriate for growth-oriented portfolios willing to pay up for quality and predictability, not value-focused strategies.

Conclusion

Conclusion

AJG is a HOLD at current valuations for existing shareholders, but NEW MONEY should wait for pullbacks to $250-260 range (20-21x forward earnings) before initiating positions. The quality is undeniable, but premium valuation limits upside and increases downside risk if execution falters. Position as 3-5% of growth-oriented portfolios focused on long-term compounding. For value investors or those requiring higher yields, better opportunities exist elsewhere.
Bull Case
$320 (15% upside) if hard market persists through 2026-2027 and M&A pipeline delivers above-trend growth
Base Case
$285 (3-5% upside) reflecting mid-teens earnings growth and stable premium multiple
Bear Case
$230 (15% downside) if insurance rates flatten, M&A slows, or recession reduces new business activity

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