Brown & Brown shares have experienced a notable pullback, dropping over 35% from their 52-week high amid cooling momentum and competitive pressures, presenting a potential buying opportunity with a forward P/E of 16.89 and projected earnings growth around 10%; however, valuation metrics like trailing P/E at 24.44 and enterprise value/EBITDA at 18.38 suggest caution in a high-interest environment, supported by strong profitability and acquisition strategy.
Brown & Brown, a prominent insurance brokerage and risk management firm, has seen its stock price retreat significantly from peak levels, prompting investors to reassess its intrinsic value amid shifting market dynamics.
Recent Price Performance and Momentum Indicators
The stock closed at $80.64, marking a decline of approximately 36% from its 52-week high of $125.68. This pullback has positioned shares near the lower end of their annual range, just above the 52-week low of $76.17. Over the past 52 weeks, the price has contracted by 21.37%, underperforming broader market indices that have generally trended upward.
Momentum has cooled, with average daily trading volume at 2.8 million shares over the last three months, down from prior peaks. The beta of 0.81 indicates lower volatility relative to the market, but recent downgrades, including from BMO highlighting competitive pressures in the insurance distribution sector, have contributed to the sentiment shift. Acquisitions remain a core growth driver, with recent deals like the purchase of Shoemaker & Besser Associates bolstering revenue streams.
Key Valuation Metrics
Current metrics provide a mixed picture, balancing solid fundamentals against the price correction. The trailing P/E ratio stands at 24.44, reflecting historical earnings strength, while the forward P/E of 16.89 suggests optimism for future profitability. Enterprise value sits at $34.31 billion, with EV/EBITDA at 18.38, indicating a premium for operational efficiency but potential headroom if growth accelerates.
| Metric | Value |
|---|---|
| Market Capitalization | $27.53B |
| Trailing P/E | 24.44 |
| Forward P/E | 16.89 |
| Price/Sales (ttm) | 4.52 |
| Price/Book (mrq) | 2.22 |
| EV/Revenue (ttm) | 6.42 |
| EV/EBITDA (ttm) | 18.38 |
| PEG Ratio (5yr expected) | N/A |
Profitability remains robust, with a profit margin of 18.69% and operating margin at 27.36%. Return on equity is 10.69%, underscoring effective capital utilization despite elevated debt levels, where total debt/equity is 64.75%.
Financial Health and Growth Drivers
Trailing twelve-month revenue reached $5.35 billion, up 34.20% year-over-year in the latest quarter, driven by organic expansion and strategic acquisitions in specialty insurance lines. Net income available to common shareholders was $989 million, with diluted EPS at $3.30. Operating cash flow of $1.37 billion supports dividend payouts and further M&A activity, with a yield of 0.82%.
Balance sheet highlights include $1.19 billion in total cash and a current ratio of 1.18, providing liquidity for ongoing operations. Levered free cash flow at $1.2 billion offers flexibility in a competitive landscape marked by InsurTech disruptions and consolidation trends.
Analyst Outlook and Estimates
Consensus estimates project EPS of $4.25 for the current year ending 2025, rising to $4.65 in 2026, implying growth of about 9.51%. Revenue forecasts show $5.95 billion for 2025, escalating to $7.33 billion in 2026, a 23.20% increase, fueled by expected demand in cyber, auto, and home insurance segments.
Quarterly projections include $0.90 EPS for the December 2025 quarter and $1.43 for March 2026, with revenue at $1.65 billion and $1.95 billion, respectively. While some analysts point to explosive upside from acquisition synergies, others caution on margin compression from competitive bidding.
Potential Risks and Considerations
Elevated enterprise value relative to EBITDA could pressure returns if interest rates remain high or economic slowdowns curb insurance spending. Institutional ownership at 80.82% signals confidence, but short interest at 3.43% of shares outstanding reflects bearish bets on near-term challenges. Legal developments, such as recent court rulings on non-compete clauses with former employees, may influence operational focus.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer to buy or sell securities. All data and opinions are based on publicly available information and should not be relied upon for making investment decisions. Readers are encouraged to conduct their own research and consult with qualified financial professionals.
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