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Growth expectations for Marsh & McLennan Companies, Inc. (NYSE:MMC) are high, but many investors are starting to ask whether its last close at $98.61 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
Check out our latest analysis for Marsh & McLennan Companies
How is MMC going to perform in the future?
If you are bullish about Marsh & McLennan Companies’s growth potential then you are certainly not alone. The consensus forecast from 17 analysts is extremely positive with earnings per share estimated to rise from today’s level of $3.317 to $5.425 over the next three years. This indicates an estimated earnings growth rate of 15% per year, on average, which signals a market-beating outlook in the upcoming years.
Is MMC’s share price justified by its earnings growth?
Marsh & McLennan Companies is available at price-to-earnings ratio of 29.73x, showing us it is overvalued based on current earnings compared to the Insurance industry average of 17.69x , and overvalued compared to the US market average ratio of 17.77x .
We understand MMC seems to be overvalued based on its current earnings, compared to its industry peers. However, since Marsh & McLennan Companies is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 29.73x and expected year-on-year earnings growth of 15% give Marsh & McLennan Companies a higher PEG ratio of 1.93x. So, when we include the growth factor in our analysis, Marsh & McLennan Companies appears a bit overvalued , based on the fundamentals.
What this means for you:
MMC’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are MMC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has MMC been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MMC’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.