Value
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.6 |
| P/S | 7.6 |
| EV/EBITDA | 1.6 |
| Fwd P/E | 8.1 |
| PEG | 8.7 |
| Analyst target | 6.0 |
- ▸Forward P/E: 14.8x
- ▸PEG: 0.72
AJG · Why this verdict
Why Arthur J. Gallagher & (AJG) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Arthur J. Gallagher delivered 35% year-over-year revenue growth and a cluster of six recent analyst upgrades signals renewed institutional interest, yet the stock remains below its 200-day moving average in a confirmed downtrend with a 5.2% monthly slope decline. Free cash flow converts at only 67 cents per dollar of net income — a quality gap that tempers the strong top-line story — while the 10.2% gap to the analyst price target with a 1.79-to-1 risk/reward offers meaningful room to run if the technical and earnings recovery sustains.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue grew 35% year-over-year, a standout rate that reflects genuine top-line momentum and positions the business for compounding cash-flow leverage if margin discipline holds alongside the growth. Growth breakdown | Revenue growth sustains above 15% year-over-year for at least 3 of the next 4 quarters, confirming the acceleration is durable rather than a one-period event. | →Stable |
| CounterTwo consecutive earnings misses before the recent recovery suggest that strong revenue growth has not yet translated cleanly to the bottom line; if cost growth or margin pressure continues to absorb revenue gains, top-line momentum alone will not drive earnings leverage. | ||
After two consecutive earnings misses, the company delivered back-to-back beats in the two most recent quarters — a reversal that suggests execution is improving and the prior shortfalls may have been transitory rather than structural. Earnings | The company beats consensus in at least 3 of the next 4 quarters, cementing the earnings recovery and removing the overhang from the prior miss streak. | →Stable |
| CounterThe two most recent beats came in at very modest margins — 0.98% and 1.4% above estimates respectively — which may reflect conservative guidance recalibration after the misses rather than a genuine operational inflection, leaving the recovery thesis vulnerable to any renewed cost pressure. | ||
The stock trades below a 200-day moving average that is declining at a 5.2% slope over 30 days — a confirmed downtrend that has historically been a headwind for sustained price appreciation until the longer-term trend reverses. Momentum breakdown | The stock reclaims and holds above its 200-day moving average within the next two quarters, confirming the downtrend has ended. | →Stable |
| CounterOn-balance volume is in a rising trend and MACD is improving despite the death cross, and momentum is recovering above the minimum threshold — the price action may be a lagging indicator of an underlying accumulation phase that is already underway. | ||
Free cash flow represents only 67% of reported net income, meaning the business retains less than 70 cents of real cash for every dollar of accounting profit — a gap that raises a modest earnings quality concern and implies some component of reported earnings is not converting into deployable cash. Quality breakdown | Free cash flow rises to above 90% of net income for 2 consecutive quarters, closing the conversion gap and resolving the earnings quality concern. | →Stable |
| CounterA Piotroski F-Score of 8 out of 9 signals strong overall financial health; the free cash flow gap may reflect timing differences or acquisition-related cash deployment rather than a structural quality deficiency, and the score may normalize naturally as integration costs subside. | ||
Revenue grew 35% year-over-year, a standout rate that reflects genuine top-line momentum and positions the business for compounding cash-flow leverage if margin discipline holds alongside the growth.
→StableGrowth breakdown
- Expectation
- Revenue growth sustains above 15% year-over-year for at least 3 of the next 4 quarters, confirming the acceleration is durable rather than a one-period event.
CounterTwo consecutive earnings misses before the recent recovery suggest that strong revenue growth has not yet translated cleanly to the bottom line; if cost growth or margin pressure continues to absorb revenue gains, top-line momentum alone will not drive earnings leverage.
After two consecutive earnings misses, the company delivered back-to-back beats in the two most recent quarters — a reversal that suggests execution is improving and the prior shortfalls may have been transitory rather than structural.
→StableEarnings
- Expectation
- The company beats consensus in at least 3 of the next 4 quarters, cementing the earnings recovery and removing the overhang from the prior miss streak.
CounterThe two most recent beats came in at very modest margins — 0.98% and 1.4% above estimates respectively — which may reflect conservative guidance recalibration after the misses rather than a genuine operational inflection, leaving the recovery thesis vulnerable to any renewed cost pressure.
The stock trades below a 200-day moving average that is declining at a 5.2% slope over 30 days — a confirmed downtrend that has historically been a headwind for sustained price appreciation until the longer-term trend reverses.
→StableMomentum breakdown
- Expectation
- The stock reclaims and holds above its 200-day moving average within the next two quarters, confirming the downtrend has ended.
CounterOn-balance volume is in a rising trend and MACD is improving despite the death cross, and momentum is recovering above the minimum threshold — the price action may be a lagging indicator of an underlying accumulation phase that is already underway.
Free cash flow represents only 67% of reported net income, meaning the business retains less than 70 cents of real cash for every dollar of accounting profit — a gap that raises a modest earnings quality concern and implies some component of reported earnings is not converting into deployable cash.
→StableQuality breakdown
- Expectation
- Free cash flow rises to above 90% of net income for 2 consecutive quarters, closing the conversion gap and resolving the earnings quality concern.
CounterA Piotroski F-Score of 8 out of 9 signals strong overall financial health; the free cash flow gap may reflect timing differences or acquisition-related cash deployment rather than a structural quality deficiency, and the score may normalize naturally as integration costs subside.
Per-dimension breakdown
Quality
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.3 |
| ROA | 1.5 |
| Gross margin | 4.6 |
| Op margin | 10.0 |
| Net margin | 5.7 |
| Current ratio | 4.2 |
| FCF quality | 5.1 |
| Moat | 6.4 |
| Piotroski F | 8.9 |
- ▸Earnings quality warning: 67% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
7.6/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 5.2 |
- ▸Strong growth: 35% YoY
Momentum
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.8 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -4.9%/30d — confirmed downtrend
Sentiment
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.7 |
| Analyst rating | 7.5 |
| Price target | 7.7 |
- ▸LLM news sentiment: +0.34 (n=2)
- ▸Analyst upside: 20%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider selling — $618,000 (0.001% of mkt cap)
Peer rank
2.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.5 |
| quality rank | 1.6 |
| growth rank | 7.3 |
Technical
2.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.2 |
| support resistance | 1.9 |
| 52w position | 2.7 |
Risk (lower is worse)
8.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.0 |
| days to cover | 8.2 |
| volatility | 5.6 |
| put call | 10.0 |
| implied vol | 7.1 |
| max pain risk | 7.0 |
| beta | 9.8 |
| debt equity | 7.6 |
Catalyst
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 1.6 |
| dividend safety | 6.5 |
| news activity | 6.0 |
- ▸Earnings concerns: 2B/2M
- ▸Dividend: 127.0%
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- MOMENTUM:6.0>=5.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.40
- EARNINGS_PROXIMITY:35d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.8<1.5@spot
Warning (2)
- DEATH_CROSS:momentum=6.0>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.83
Upside
+8.1%
Downside
9.7%
Sizing output
AVOID
SetupRECOVERY — Death cross but MACD improving, RSI 62
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:6.0>=5.5. Top dim: Risk (lower is worse) at 8.0; weakest: Technical at 2.3. No conviction either direction.
The strongest dimensions are Risk (lower is worse) at 8.0, Growth at 7.6, and Sentiment at 7.3; the weakest are Technical at 2.3, Peer rank at 2.6, and Catalyst at 4.7. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 0.83 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Revenue grew 35% year-over-year, a standout rate that reflects genuine top-line momentum and positions the business for compounding cash-flow leverage if margin discipline holds alongside the growth.
Trip ifRevenue growth falls below 15% YoY for 2 consecutive quarters.
- P2After two consecutive earnings misses, the company delivered back-to-back beats in the two most recent quarters — a reversal that suggests execution is improving and the prior shortfalls may have been transitory rather than structural.
Trip ifEPS surprise falls below 0% in 2 of the next 3 reported quarters.
- P3The stock trades below a 200-day moving average that is declining at a 5.2% slope over 30 days — a confirmed downtrend that has historically been a headwind for sustained price appreciation until the longer-term trend reverses.
Trip ifStock closes above its 200-day moving average and holds for 10 consecutive trading sessions, confirming the downtrend has reversed.
- P4Free cash flow represents only 67% of reported net income, meaning the business retains less than 70 cents of real cash for every dollar of accounting profit — a gap that raises a modest earnings quality concern and implies some component of reported earnings is not converting into deployable cash.
Trip ifFree cash flow rises above 90% of net income for 2 consecutive quarters, eliminating the conversion gap.