Is Brown & Brown (BRO) Now Attractively Priced After A 20% One-Year Share Price Decline
If you are wondering whether Brown & Brown at around US$80 per share is offering fair value or a potential mispricing, you are not alone.
The stock shows mixed recent returns, with a 0.1% move over the last 7 days, 2.4% over 30 days, 3.4% year to date, a 20.1% decline over 1 year, 36.7% over 3 years and 77.2% over 5 years, which can change how investors think about both opportunity and risk.
Recent coverage has focused on Brown & Brown as an established insurance broker. Investors are watching how it responds to shifts in the insurance sector and broader market sentiment. This context helps explain why the share price has been reacting over different timeframes as investors reassess what they are willing to pay for the stock.
On our checklist based valuation framework, Brown & Brown scores 3 out of 6. Next we will look at how different valuation approaches assess the stock today, before ending with a way to pull all these views together into a clearer picture of value.
The Excess Returns model looks at how much value a company may create over and above the return that equity investors require, based on its profitability on shareholder capital and how that capital base might grow over time.
For Brown & Brown, the model uses a Book Value of $36.75 per share and a Stable EPS of $6.63 per share, derived from the median Return on Equity over the past 5 years. The implied Cost of Equity is $2.88 per share, which leads to an Excess Return of $3.75 per share. The Average Return on Equity in the model is 16.04%, and the Stable Book Value is set at $41.34 per share, based on weighted future Book Value estimates from 2 analysts.
Using these inputs, the Excess Returns valuation arrives at an intrinsic value of about $142.92 per share. Compared with the current share price of about $80, this implies the stock is 43.8% undervalued on this model.
For profitable companies, the P/E ratio is a useful quick check because it links what you pay for each share to the earnings that business is currently generating. A higher or lower P/E can reflect what the market is willing to pay based on growth expectations and perceived risk, with stronger growth or lower risk often supporting a higher “normal” P/E and slower growth or higher risk often matching with a lower one.
Brown & Brown is trading on a P/E of 27.71x. That is above the Insurance industry average P/E of 12.92x and below the peer group average of 45.42x. Simply Wall St’s proprietary “Fair Ratio” for Brown & Brown is 16.50x, which is the P/E level the model suggests for this company given factors such as its earnings growth profile, profit margins, industry, market capitalization and risk characteristics.
This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for company specific traits rather than assuming one size fits all. Compared with the current P/E of 27.71x, the Fair Ratio of 16.50x indicates that Brown & Brown is trading above what the model suggests as a balanced level.
Earlier we mentioned that there is an even better way to think about valuation, so on Simply Wall St’s Community page you can use Narratives to link your view of Brown & Brown’s story to a set of revenue, earnings and margin estimates, turn those into a Fair Value, compare that value with the current share price to frame buy or sell decisions, and see it all update as new news or earnings arrive. This is why one investor might build a Narrative that lines up with a Fair Value near the higher analyst target of US$130 while another could lean toward the lower end around US$87, even though both are looking at the same company.
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.
