AJG
Arthur J. Gallagher & Co.
$204.75
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 75.4% above fair value
You pay
$204.75
Bear
$48.01
Fair
$116.76
Bull
$163.40
Bear
$48.01
-76.6%
ROTCE 4.8% → 0.30x TBV
Fair
$116.76
-43.0%
ROTCE 6.4% → 0.73x TBV
Bull
$163.40
-20.2%
ROTCE 7.4% → 1.02x TBV
Key Value Driver
ROTCE (6.4%) vs. cost of equity (7.3%)
Implied Market Multiple
2.26x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $268.38 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $116.76 per share.
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: $319.92 (383% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $268.38 (from 29 analysts). Our estimate is 75% 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