Head to Head Comparison: Arthur J. Gallagher & Co. (AJG) & Brown & Brown (BRO)

Brown & Brown (NYSE: BRO) and Arthur J. Gallagher & Co. (NYSE:AJG) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, risk, analyst recommendations, dividends, institutional ownership, valuation and profitability.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Brown & Brown and Arthur J. Gallagher & Co., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Brown & Brown 1 8 1 0 2.00
Arthur J. Gallagher & Co. 1 3 5 0 2.44

Brown & Brown presently has a consensus price target of $43.43, indicating a potential downside of 0.46%. Arthur J. Gallagher & Co. has a consensus price target of $59.33, indicating a potential upside of 2.40%. Given Arthur J. Gallagher & Co.’s stronger consensus rating and higher possible upside, analysts clearly believe Arthur J. Gallagher & Co. is more favorable than Brown & Brown.

Institutional and Insider Ownership

72.6% of Brown & Brown shares are owned by institutional investors. Comparatively, 83.4% of Arthur J. Gallagher & Co. shares are owned by institutional investors. 17.0% of Brown & Brown shares are owned by company insiders. Comparatively, 1.6% of Arthur J. Gallagher & Co. shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Brown & Brown and Arthur J. Gallagher & Co.’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Brown & Brown $1.80 billion 3.39 $575.43 million $1.86 23.46
Arthur J. Gallagher & Co. $5.78 billion 1.81 $887.80 million $2.48 23.36

Arthur J. Gallagher & Co. has higher revenue and earnings than Brown & Brown. Arthur J. Gallagher & Co. is trading at a lower price-to-earnings ratio than Brown & Brown, indicating that it is currently the more affordable of the two stocks.

Dividends

Brown & Brown pays an annual dividend of $0.54 per share and has a dividend yield of 1.2%. Arthur J. Gallagher & Co. pays an annual dividend of $1.56 per share and has a dividend yield of 2.7%. Brown & Brown pays out 29.0% of its earnings in the form of a dividend. Arthur J. Gallagher & Co. pays out 62.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Brown & Brown has increased its dividend for 6 consecutive years and Arthur J. Gallagher & Co. has increased its dividend for 16 consecutive years. Arthur J. Gallagher & Co. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Brown & Brown has a beta of 0.78, meaning that its stock price is 22% less volatile than the S&P 500. Comparatively, Arthur J. Gallagher & Co. has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500.

Profitability

This table compares Brown & Brown and Arthur J. Gallagher & Co.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Brown & Brown 14.52% 11.10% 4.99%
Arthur J. Gallagher & Co. 7.62% 13.68% 4.37%

Summary

Arthur J. Gallagher & Co. beats Brown & Brown on 11 of the 17 factors compared between the two stocks.

Brown & Brown Company Profile

Brown & Brown, Inc. is a diversified insurance agency, wholesale brokerage, insurance programs and service company. The Company markets and sells insurance products and services, in the property, casualty and employee benefits areas. It provides its customers with non-investment insurance contracts, as well as other customized risk management products and services. It operates through four segments: the Retail Segment, which provides a range of insurance products and services to commercial, public and quasi-public entities, and to professional and individual customers; the National Programs Segment, which acts as a managing general agent, provides professional liability and related package products; the Wholesale Brokerage Segment, which markets and sells excess and surplus commercial and personal lines insurance, and the Services Segment, which provides insurance-related services, including third-party claims administration and medical utilization management services.

Arthur J. Gallagher & Co. Company Profile

Arthur J. Gallagher & Co. and its subsidiaries are engaged in providing insurance brokerage and consulting services, and third-party claims settlement and administration services to both domestic and international entities. The Company operates through three segments: brokerage, risk management and corporate. The brokerage segment primarily consists of retail and wholesale insurance brokerage operations. Its retail brokerage operations negotiate and place property/casualty, employer-provided health and welfare insurance, and healthcare exchange and retirement solutions principally for middle-market commercial, industrial, public entity, religious and not-for-profit entities. The risk management segment provides contract claim settlement and administration services for enterprises that choose to self-insure some or all of their property/casualty coverages and for insurance companies that choose to outsource some or all of their property/casualty claims departments.

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