Value
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.1 |
| P/S | 7.3 |
| EV/EBITDA | 0.5 |
| Fwd P/E | 7.4 |
| PEG | 8.2 |
| Analyst target | 5.0 |
- ▸Forward P/E: 16.7x
- ▸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.
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. The TrendMatrix editorial team frequently holds personal long-term positions in securities discussed. We disclose positions held at the time of publication on each piece. We maintain a trading-window policy: we do not initiate or close positions in the same direction as a TrendMatrix publication within 24 hours before or 72 hours after publication.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security. Our sole compensation is subscription revenue.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score5.8/10
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. | ↓Deteriorating |
| 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. | ↓Deteriorating |
| 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.
↓DeterioratingEarnings
- 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.
↓DeterioratingMomentum 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
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 8.0 |
| Volume | 1.8 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.4 |
| Price target | 6.9 |
| erm sentiment | 6.1 |
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Negligible insider selling — $618,000 (0.001% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.3/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.2 |
| quality rank | 2.8 |
| growth rank | 7.1 |
Technical
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.9 |
| support resistance | 3.3 |
| 52w position | 5.3 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.4 |
| days to cover | 6.5 |
| volatility | 5.7 |
| put call | 1.6 |
| implied vol | 5.8 |
| beta | 10.0 |
| debt equity | 7.6 |
- ▸Elevated put/call: 1.77
Catalyst
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 7.5 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 1.6 |
| dividend safety | 7.5 |
- ▸Earnings concerns: 2B/2M
- ▸Earnings in 5 days
- ▸Dividend aristocrat: 1.2% yield
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 (4)
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (4)
- MOMENTUM:3.3<4.5
- ASYMMETRY:0.2<1.5@spot
- DEATH_CROSS:HARD_BLOCK
- EARNINGS_PROXIMITY:5d<=7d
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.19
Upside
+2.2%
Downside
11.3%
Sizing output
AVOID
SetupRange Bound — RSI 48 mid-range, Bollinger mid-band
EdgeNo clear 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: INSIDER:OK. Top dim: Growth at 7.6; weakest: Momentum at 3.3. No conviction either direction.
The strongest dimensions are Growth at 7.6, Insider at 7.3, and Sentiment at 6.9; the weakest are Momentum at 3.3, Peer rank at 4.3, and Technical at 4.5. The V9 engine flagged 4 failed gates with 1 warning, producing an asymmetric reward-to-risk of 0.19 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.