• If you are wondering whether Marsh & McLennan Companies, at around US$166 per share, still offers solid value, it helps to step back and look at what the current price might be implying.
• The stock is up 1.6% over the last 7 days, but is down 5.5% over 30 days, down 9.0% year to date, and has fallen 26.7% over the past year, which may have shifted how the market is thinking about its risk and return profile.
• Recent attention on the broader insurance and risk management sector has kept Marsh & McLennan in focus, as investors weigh how changing client needs and regulatory developments could affect large intermediaries. Headlines around sector competition and demand for risk advisory work help frame the context for these price moves.
• On Simply Wall St's valuation framework, Marsh & McLennan Companies has a value score of 4 out of 6. This sets things up to look at traditional valuation methods next, then finish with a broader way of thinking about what the stock might be worth.

Find out why Marsh & McLennan Companies's -26.7% return over the last year is lagging behind its peers.

Approach 1: Marsh & McLennan Companies Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn over and above the return that shareholders require, then capitalises those extra earnings to estimate an intrinsic value per share.

For Marsh & McLennan Companies, the model uses a Book Value of $30.22 per share and a Stable EPS estimate of $11.36 per share, based on weighted future Return on Equity estimates from 5 analysts. The Average Return on Equity is 31.18%, while the Cost of Equity is $2.59 per share, implying an Excess Return of $8.77 per share. Stable Book Value is put at $36.44 per share, based on weighted future Book Value estimates from 4 analysts.

When these excess returns are projected and discounted, the Excess Returns model here points to an intrinsic value of about $282.30 per share. Compared with a current share price around $166, this implies the stock is 41.2% undervalued under this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Marsh & McLennan Companies is undervalued by 41.2%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Marsh & McLennan Companies.

Approach 2: Marsh & McLennan Companies Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It ties directly to the bottom line and helps you compare how the market values earnings across different stocks.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually points to a lower one.

Marsh & McLennan Companies currently trades on a P/E of about 20.39x. That is very close to the peer average of 20.42x and above the Insurance industry average P/E of 11.26x. Simply Wall St’s Fair Ratio for the stock is 13.49x. This Fair Ratio is a proprietary estimate of what the P/E might be, given factors such as earnings growth, profit margins, industry, market cap and risk. It gives you more tailored context than a simple peer or industry comparison.

Comparing the current P/E of 20.39x with the Fair Ratio of 13.49x suggests the stock is trading above this tailored estimate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Marsh & McLennan Companies Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St give you a clear story behind the numbers by linking your view of Marsh & McLennan Companies, including assumptions for future revenue, earnings and margins, to a financial forecast and a Fair Value that you can easily compare with the current price. All of this is available within an accessible Community tool that updates when new news or earnings arrive and that can reflect very different perspectives. For example, one investor may think the stock could be worth around US$236 based on stronger long term outcomes, while another may see closer to US$179 as more reasonable under a more cautious outlook.

Do you think there's more to the story for Marsh & McLennan Companies? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.