Over the past six months, Marsh & McLennan’s shares (currently trading at $175.81) have posted a disappointing 13.6% loss, well below the S&P 500’s 3.1% gain. This may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for MRSH? Find out in our full research report, it’s free.
Why Is Marsh & McLennan a Good Business?
With roots dating back to 1871 and a presence in over 130 countries, Marsh & McLennan (NYSE: MRSH) is a global professional services firm that helps organizations manage risk, strategy, and workforce challenges through its four specialized businesses.
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Marsh & McLennan’s 9.4% annualized revenue growth over the last five years was impressive. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
With $26.98 billion in revenue over the past 12 months, Marsh & McLennan is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Marsh & McLennan has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 16.5% over the last five years.
Final Judgment
These are just a few reasons why we're bullish on Marsh & McLennan. With the recent decline, the stock trades at 17.4× forward P/E (or $175.81 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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