Amidst a fluctuating market, Aon PLC (AON, Financial) has experienced a daily loss of 6.03% and a 3-month decline of 13.83%. Despite these headwinds, the company's Earnings Per Share (EPS) stand at a robust 13.15. Investors are often confronted with the question: Is Aon PLC (AON) modestly undervalued? This article delves into a valuation analysis to explore this query and invites readers to examine the subsequent insights.
Company Introduction
Aon PLC is a global powerhouse in insurance and reinsurance brokerage, complemented by its human resource solutions. With its headquarters in London, the company boasts a workforce of approximately 50,000 across more than 120 countries. The comparison of Aon PLC's current stock price of $294.12 to the GF Value of $341.31 suggests that the stock might be trading below its intrinsic value. This sets the stage for an in-depth examination of the company's valuation.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock based on historical trade multiples, internal adjustments for past performance, and future business projections. When a stock's price significantly exceeds the GF Value Line, it may be overvalued, indicating potentially lower future returns. Conversely, a price well below the GF Value Line could signal undervaluation and the prospect of higher future returns. Currently, Aon PLC's stock price suggests it is modestly undervalued, providing a potential opportunity for investors seeking long-term gains.
Because Aon PLC is relatively undervalued, the long-term return of its stock is likely to outpace its business growth, presenting an attractive proposition for investors.
Financial Strength
Investors must scrutinize a company's financial strength to avoid capital loss. Aon PLC's cash-to-debt ratio of 0.68 positions it below 70.48% of its industry peers. This fair balance sheet strength, as reflected in GuruFocus's ranking of 5 out of 10, is a crucial factor to consider before investing.
Profitability and Growth
Profitability is a less risky investment indicator, particularly when consistent over time. Aon PLC has displayed profitability over the past decade, with a 28.76% operating margin that surpasses 88.52% of its industry counterparts. This strong profitability, coupled with a revenue growth rate better than 64.97% of the industry, underscores Aon PLC's robust performance. Furthermore, the company's 3-year average EBITDA growth rate of 16.4% is commendable, ranking better than 68.46% of its industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another profitability measure. Aon PLC's ROIC of 10.46% over the past 12 months exceeds its WACC of 7.87%, indicating value creation for shareholders.
Conclusion
In conclusion, Aon PLC (AON, Financial) appears to be modestly undervalued, with fair financial health and robust profitability. The company's growth also ranks well within the industry. For a more detailed financial overview, interested investors can review Aon PLC's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
