BRO Stock Study (3-3-26)
Posted by Mark on August 28, 2025 at 07:09 | Last modified: March 4, 2026 08:10I recently did a stock study on Brown & Brown, Inc. (BRO, $72.36).
M* writes:
> Brown & Brown Inc is a diversified insurance agency, wholesale
> brokerage, insurance programs, and service. The company’s business
> is divided into two reportable segments: (i) the Retail segment,
> and (ii) the Specialty Distribution segment. The Retail segment
> provides a broad range of insurance products and services to
> commercial, public and quasi-public entities, and to professional
> and individual customers, as well as non-insurance warranty
> services and products through automobile and recreational vehicle
> dealer services businesses. The Specialty Distribution segment
> consists of wholesale brokerage and specialty businesses.
> Its geographic area is U.S, U.K and Others.
Over the past decade, this medium-size company grows sales and EPS at annualized rates of 14.4% and 15.6%, respectively. Lines are mostly up, straight, and parallel except for EPS dips in ’18 and ’25. Five-year EPS R^2 is 0.81 and Value Line (VL) gives an Earnings Predictability score of 95. Shares outstanding increase 13.6% (1.4%/year).
Over the past decade, PTPM leads peer and industry averages while ranging from 22.1% (’19) to 27.7% (’24) with a last-5-year mean of 25.7%. ROE trails peer and industry averages while falling from 11.0% to 8.6% (’25) with a last-5-year mean of 14.1%. Debt-to-Capital is less than peer and industry averages despite increasing from 31.3% to 38.7% (’25) with a last-5-year mean of 40.4%.
Quick Ratio is 0.56 and Interest Coverage 5.5 per M* who assigns “Narrow” Economic Moat but a C grade for Financial Health (BetterInvesting® website). VL rates the company A for Financial Strength (Interest Coverage 7.8).
With regard to sales growth:
- YF gives YOY ACE 21.9% and 6.9% for ’26 and ’27 (based on 11 analysts).
- Zacks gives YOY ACE 23.5% and 5.9% for ’26 and ’27, respectively (6 analysts).
- VL projects 12.2% annualized from ’24-’29.
- CFRA projects 15.0% YOY and 13.5% per year for ’26 and ’25-’27, respectively.
- M* offers a 2-year ACE of 15.4%.
I am forecasting below the range at 6.0% per year.
With regard to EPS growth:
- MarketWatch projects 8.7% and 8.2% per year for ’25-’27 and ’25-’28, respectively (based on 20 analysts).
- Nasdaq.com gives ACE 9.9% YOY and 8.4%/year for ’27 and ’26-’28 [9 / 8 / 1 analyst(s) for ’26 / ’27 / ’28].
- Seeking Alpha projects 4-year annualized growth of 7.3%.
- Argus projects 5-year annualized growth of 10.0%.
- Finviz gives ACE 5-year annualized growth of 8.1% (6).
- LSEG estimates LTG at 7.4%.
- YF gives YOY ACE 6.1% and 10.2% for ’26 and ’27, respectively (16).
- Zacks gives YOY ACE 7.0% and 9.7% for ’26 and ’27 (7) along with 5-year annualized growth of 7.3%.
- VL projects 9.7% annualized from ’24-’29.
- CFRA projects 5.6% YOY and 7.8% per year for ’26 and ’25-’27 along with 3-year CAGR of 11.0%.
My 7.0% forecast is below the long-term-estimate range (mean of six: 8.3%). Initial value is ’25 EPS of $3.16/share.
My Forecast High P/E is 25.0. Over the past 10 years, high P/E ranges from 18.7 in ’17 to 39.8 in ’25 with a last-5-year mean of 32.6 and last-5-year-mean average P/E of 26.8. I am near bottom of the range (only ’17 is less).
My Forecast Low P/E is 15.0. Over the past 10 years, low P/E ranges from 14.6 in ’17 to 24.1 in ’25 with a last-5-year mean of 20.9. I am forecasting near bottom of the range (only ’17 is less).
My Low Stock Price Forecast (LSPF) of $48.00 is default based on initial value from above. This is 33.7% less than previous close and 26.9% less than the 52-week low.
Over the last 10 years, Payout Ratio (PR) falls from 27.6% in ’16 to 19.5% in ’25 with a last-5-year mean of 17.4%. I am forecasting below the range at 15.0%.
These inputs land BRO in the HOLD zone with a U/D ratio of 1.6. Total Annualized Return (TAR) is 9.5%.
PAR (using Forecast Average—not High—P/E) of 4.9% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 77 studies done in the past 90 days (my study and 37 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 11.7%, 11.3%, 29.2, 19.7, and 17.6% respectively. I am lower across the board. VL projects a future average annual P/E of 22.5 that is less than MS (24.5) and greater than mine (20.0).
MS high / low EPS are $5.57 / $3.20 versus my $4.43 / $3.16 (per share). My high EPS is less due to a lower growth rate. VL high EPS of $5.50 is in the middle.
MS LSPF of $61.00 implies a Forecast Low P/E of 19.1: less than the above-stated 19.7. MS LSPF is 3.2% less than the default $3.20/share * 19.7 = $63.04 that results in more conservative zoning. MS LSPF is 27.1% greater than mine, however.
MOS is robust in the study because my inputs are [near or] less than [bottom of] historical/analyst/MS averages/ranges. Also backing this assessment are MS TAR exceeding mine by 8.6% per year [arguably too high] and the much greater LSPF.
Regarding valuation, PEG is 2.2 and 3.0 per Zacks and my projected P/E: slightly overvalued (1.7 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is somewhat low at 0.84. “Quick and Dirty DCF” calculates stock undervalued by 29% (M* currently says 25% discount).
I wish I hadn’t seen two things about this stock. First, the Financial Health grade of C (M*) is diametrically-opposed to the VL A-rating (Financial Strength). Also questionable is a “smart score” of 1 (“likely underperform”) by CNN Business. I don’t know how reliable the metric, but I can never recall seeing a 1 before.†
On the other hand, Cy Lynch does present the company as his Manifest Investing Round Table selection for Feb 2026.
Per U/D, BRO is a BUY under ~$63.50/share. BetterInvesting® TAR criterion would be met [110.8 / ((14.07 / 100 ) +1 ) ^ 5] ~ $57 given a forecast high price ~$111.
A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).
†—“Smart score” pertains only to the next 12 months rather than long-term.