Over the last six months, Brown & Brown’s shares have sunk to $67.68, producing a disappointing 14.4% loss - a stark contrast to the S&P 500’s 8.4% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Following the pullback, is now a good time to buy BRO? Find out in our full research report, it’s free.
Why Are We Positive on Brown & Brown?
With roots dating back to 1939 and operations spanning 44 U.S. states and 14 countries, Brown & Brown (NYSE: BRO) is an insurance brokerage and risk management firm that markets and sells insurance products across property, casualty, and employee benefits sectors.
1. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect Brown & Brown’s revenue to rise by 11.2%. While this projection is below its 20.6% annualized growth rate for the past two years, it is admirable and suggests the market is forecasting success for its products and services.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Brown & Brown’s astounding 18.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Brown & Brown has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 23.2% over the last five years.
Final Judgment
These are just a few reasons why Brown & Brown ranks highly on our list. After the recent drawdown, the stock trades at 15× forward P/E (or $67.68 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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