- If you are wondering whether Brown & Brown is attractively priced today, it helps to step back and separate the share price story from the underlying value story.
- The stock last closed at US$68.38, with a 7 day return of a 4.8% decline, 30 day return of a 0.4% decline, year to date return of an 11.9% decline, and 1 year return of a 41.3% decline, set against 3 year and 5 year returns of 30.6% and 52.5% respectively.
- Recent coverage of Brown & Brown has focused on its position in the US insurance sector and how sentiment around insurance brokers has been shifting. This helps frame these share price moves. News flow has mainly revolved around how investors are reassessing risk and growth expectations across listed insurance names, and Brown & Brown is part of that conversation.
- Our simple valuation checks give Brown & Brown a 4 out of 6 valuation score. This sets up a closer look at metrics like P/E and discounted cash flow later in the article, and we will also come back at the end to a broader way of thinking about value that goes beyond any single model.
Find out why Brown & Brown's -41.3% return over the last year is lagging behind its peers.
Approach 1: Brown & Brown Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, then capitalizes those extra earnings into an intrinsic value per share.
For Brown & Brown, the model uses a Book Value of $37.34 per share and a Stable EPS of $6.53 per share, based on weighted future Return on Equity estimates from 4 analysts. The Average Return on Equity is 15.12%, while the Cost of Equity is $3.01 per share. That gap translates into an Excess Return of $3.52 per share, which is what this approach treats as value created beyond the shareholder hurdle rate.
The Stable Book Value used in the model is $43.20 per share, sourced from weighted future Book Value estimates from 2 analysts. Bringing these inputs together, the Excess Returns model produces an estimated intrinsic value of about $141.82 per share, compared with the recent share price of $68.38, implying the stock is 51.8% undervalued according to this framework.
Result: UNDERVALUED
Our Excess Returns analysis suggests Brown & Brown is undervalued by 51.8%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.
Approach 2: Brown & Brown Price vs Earnings
P/E is a common way to look at profitable companies because it links what you pay per share directly to the earnings that each share produces. In simple terms, a higher P/E usually reflects stronger growth expectations or lower perceived risk, while a lower P/E often goes with more modest growth expectations or higher perceived risk.
Brown & Brown currently trades on a P/E of 22.32x. That sits above the Insurance industry average P/E of 11.43x, and also above the peer group average of 36.50x when you look at relative positioning across listed insurers. To sharpen this view, Simply Wall St calculates a proprietary “Fair Ratio” of 14.89x for Brown & Brown. This metric aims to show the P/E you might expect for the company given its earnings growth profile, profit margins, industry, market cap and specific risk factors.
The Fair Ratio can be more useful than a simple comparison with peers or the broad industry, because it adjusts for Brown & Brown’s own characteristics rather than assuming all insurers deserve the same multiple. Against this Fair Ratio of 14.89x, the current P/E of 22.32x looks higher, which points to the shares trading above that modelled fair level.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Brown & Brown Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simple stories you build around Brown & Brown that link your view of its future revenue, earnings and margins to a financial forecast, a fair value, and then a clear comparison with today’s share price. All of this is available within an easy tool on Simply Wall St’s Community page that updates as news or earnings arrive and can reflect very different viewpoints. For example, one investor might lean toward the higher US$130 price target because they focus on acquisitions, cash flow and share repurchases, while another leans toward the US$87 target because they are more cautious about revenue growth, margins and regulatory risk.
Do you think there's more to the story for Brown & Brown? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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