Reassessing Arthur J. Gallagher’s Valuation After Recent Share Price Pullback in 2025

• If you have ever wondered whether Arthur J. Gallagher at around $250 a share is still a buy or finally priced for perfection, you are in the right place.
• The stock has slipped about 3.2% over the last month and is down 9.1% year to date, even after a modest 4.3% rebound over the past week, which hints that market sentiment has been wobbling despite a strong 115.1% gain over five years.
• Recently, the company has stayed in the spotlight as investors focus on the resilience of insurance brokers in a higher rate, still-volatile risk environment and the role of steady fee-based revenue in choppy markets. At the same time, sector-wide commentary on insurance pricing cycles and demand for risk management services has nudged investors to reconsider how much they are willing to pay for stable compounders like Arthur J. Gallagher.
• On our framework the stock only scores a 1/6 valuation check score, which suggests it screens as expensive on most traditional yardsticks. However, that is only part of the story. Next we will walk through the main valuation approaches investors use for Arthur J. Gallagher and finish with a more holistic way to judge what the market is really pricing in.

Arthur J. Gallagher scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Arthur J. Gallagher Excess Returns Analysis

The Excess Returns model looks at how much value Arthur J. Gallagher creates over and above the return that shareholders require, then capitalizes those surplus profits into an intrinsic value per share.

In this framework, the company starts with a Book Value base of $90.37 per share and an Average Return on Equity of about 14.00%. That ROE, combined with analyst expectations, translates into a Stable EPS of $14.73 per share, supported by a Stable Book Value of $105.24 per share over the long run. Against a Cost of Equity of $7.32 per share, the model estimates an Excess Return of $7.41 per share, implying that each dollar of equity is expected to earn more than investors strictly demand.

Discounting those excess returns back, the Excess Returns model arrives at an intrinsic value of roughly $305.74 per share, which is about 17.9% above the current market price. On this basis, Arthur J. Gallagher screens as undervalued despite a premium headline multiple.

Result: UNDERVALUED

Our Excess Returns analysis suggests Arthur J. Gallagher is undervalued by 17.9%. Track this in your watchlist or portfolio, or discover 911 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Arthur J. Gallagher.

Approach 2: Arthur J. Gallagher Price vs Earnings

For a consistently profitable business like Arthur J. Gallagher, the price to earnings, or PE, ratio is a practical way to judge valuation because it links what investors pay today to the earnings generated each year. In general, faster and more reliable earnings growth, combined with lower perceived risk, justifies a higher PE, while slower or more volatile earnings should trade on a lower multiple.

Arthur J. Gallagher currently trades on about 40.2x earnings, which is well above both the broader Insurance industry average of roughly 13.4x and the peer group average of around 23.2x. To put that into context, Simply Wall St calculates a proprietary “Fair Ratio” of about 18.3x for Arthur J. Gallagher, which reflects its specific mix of earnings growth, profitability, industry positioning, market cap and risk profile. This Fair Ratio is more informative than a simple peer or industry comparison because it adjusts for how different the company is from its rivals on those fundamentals.

Comparing the current 40.2x PE to the 18.3x Fair Ratio suggests the market is paying a substantial premium to what those fundamentals alone would imply.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Arthur J. Gallagher Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you connect your view of Arthur J. Gallagher’s story to a concrete financial forecast, then to a Fair Value you can compare with today’s share price to decide whether to buy, hold, or sell. A Narrative captures your assumptions for revenue growth, margins, earnings and the multiple you think the market will eventually pay, and then keeps that Fair Value estimate updated as new information like earnings releases or major news arrives. That means two investors can look at the same stock and reach different but structured conclusions. For example, one Narrative might assume the bullish end of the analyst range with earnings closer to $4.2 billion and a Fair Value above $380. A more cautious Narrative might lean toward $2.9 billion in earnings and a Fair Value nearer $270, giving you a clear, numbers backed way to see how different stories translate into different price targets.

Do you think there's more to the story for Arthur J. Gallagher? 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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