Value
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.0 |
| P/S | 7.2 |
| EV/EBITDA | 0.4 |
| Fwd P/E | 7.3 |
| PEG | 8.3 |
| Analyst target | 4.0 |
- ▸Forward P/E: 17.0x
- ▸PEG: 0.79
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 score5.6/10
ConfidenceMEDIUM
MacroNEUTRAL
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.
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.
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
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.2 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 7.5 |
| Volume | 5.6 |
- ▸Overbought (RSI 76)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat/negative + RSI 76 (late-cycle distribution risk)
Sentiment
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.5 |
| Price target | 5.8 |
| erm sentiment | 5.4 |
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
2.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.2 |
| quality rank | 2.8 |
| growth rank | 7.1 |
Technical
1.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.1 |
| 52w position | 4.6 |
Risk (lower is worse)
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.6 |
| days to cover | 6.7 |
| volatility | 5.2 |
| put call | 7.1 |
| implied vol | 6.5 |
| beta | 10.0 |
| debt equity | 7.6 |
Catalyst
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 1.6 |
| dividend safety | 6.0 |
- ▸Earnings concerns: 2B/2M
- ▸Dividend: 111.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:7.5>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:27d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.3=NEGATIVE
Warning (2)
- DEATH_CROSS:momentum=7.5>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.34
Upside
-5.0%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 76
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.6 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.3=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.34 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 7.6, Momentum at 7.5, and Risk (lower is worse) at 7.4; the weakest are Technical at 1.6, Peer rank at 2.8, and Catalyst at 4.4. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -0.34 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Strong Revenue Growth Acceleration
Trip ifRevenue growth falls below 15% YoY for 2 consecutive quarters.
- P2Earnings Recovery After Miss Streak
Trip ifEPS surprise falls below 0% in 2 of the next 3 reported quarters.
- P3Confirmed Downtrend 200ma Headwind
Trip ifStock closes above its 200-day moving average and holds for 10 consecutive trading sessions, confirming the downtrend has reversed.
- P4Fcf Conversion Gap Quality Concern
Trip ifFree cash flow rises above 90% of net income for 2 consecutive quarters, eliminating the conversion gap.