Investment Thesis
AJG demonstrates solid revenue growth of 20.7% YoY with strong operating margins at 13.4% and healthy free cash flow generation of $1.9B, indicating operational efficiency. However, diluted EPS declined 11.7% YoY despite revenue gains, and low ROE of 6.4% combined with elevated leverage (0.55x debt/equity) and tight liquidity (1.06x current ratio) present concerning capital efficiency and financial flexibility issues.
AJG Strengths
- Strong revenue growth of 20.7% YoY demonstrating market expansion
- Healthy operating margin of 13.4% and net margin of 10.7% showing operational profitability
- Robust free cash flow generation at $1.9B with FCF margin of 13.4%, providing operational returns
- Conservative debt-to-equity ratio of 0.55x compared to sector leverage norms
AJG Risks
- Diluted EPS declined 11.7% YoY despite strong revenue growth, indicating potential share dilution or margin compression
- Weak ROE of 6.4% suggests poor returns on shareholder capital despite large equity base
- Tight liquidity with current ratio of 1.06x limiting financial flexibility
- Interest coverage ratio of 2.9x is adequate but not robust, limiting debt capacity
- Elevated total liabilities of $47.3B representing 67% of total assets, indicating high financial leverage
Key Metrics to Watch
- Trend in EPS growth relative to revenue growth - reconcile 20.7% revenue growth with -11.7% EPS decline
- ROE trajectory - currently weak at 6.4%, monitor if capital allocation improves returns
- Operating cash flow sustainability and free cash flow margins to assess quality of earnings
- Debt service coverage and interest expense trends given $12.9B long-term debt
AJG Financial Metrics
AJG Profitability Ratios
AJG Balance Sheet & Liquidity
AJG 5-Year Financial Trend
5-Year Trend Summary: Arthur J. Gallagher & Co.'s revenue has grown significantly by 70% over the 5-year period, indicating strong business expansion. The most recent EPS of $4.42 reflects profitable operations.
AJG Growth Metrics (YoY)
AJG Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q3 2025 | $2.8B | $272.7M | $1.04 |
| Q2 2025 | $2.8B | $283.4M | $1.27 |
| Q1 2025 | $3.3B | $608.4M | $2.72 |
| Q3 2024 | $2.5B | $280.7M | $1.28 |
| Q2 2024 | $2.4B | $234.5M | $1.07 |
| Q1 2024 | $2.7B | $486.5M | $2.24 |
| Q3 2023 | $2.0B | $255.8M | $1.19 |
| Q2 2023 | $2.0B | $234.5M | $1.07 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
AJG Capital Allocation
AJG SEC Filings
Access official SEC EDGAR filings for Arthur J. Gallagher & Co. (CIK: 0000354190)