AJG
Arthur J. Gallagher & Co.
$234.39
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 255.1% above fair value
You pay
$234.39
Bear
$27.23
Fair
$66.01
Bull
$92.38
Bear
$27.23
-88.4%
ROTCE 4.8% → 0.30x TBV
Fair
$66.01
-71.8%
ROTCE 6.4% → 0.73x TBV
Bull
$92.38
-60.6%
ROTCE 7.4% → 1.02x TBV
Adjust Assumptions
6.4%
7.3%
Key Value Driver
ROTCE (6.4%) vs. cost of equity (7.3%)
Implied Market Multiple
2.58x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (29 analysts)
$278.45
Divergence from AlphaVal
76%
Summary
With ROTCE of 6.4% vs. 7.3% cost of equity, fair P/TBV is 0.73x on $90.78 tangible book, implying $66.01 per share. DDM cross-check: $349.19.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Return on equity (6.4%) is below the minimum investors require (7.3%). This means the bank is worth less than the net assets on its books.
Dividend-based valuation: $349.19 (429% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $278.45 (from 29 analysts). Our estimate is 76% below the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly