Arthur J. Gallagher & Co. (NYSE: AJG) and Willis Towers Watson Public Limited Company (NASDAQ:WLTW) are both large-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitabiliy, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Earnings & Valuation

This table compares Arthur J. Gallagher & Co. and Willis Towers Watson Public Limited Company’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arthur J. Gallagher & Co. $5.65 billion 1.83 $881.10 million $2.37 24.31
Willis Towers Watson Public Limited Company $7.86 billion 2.52 $1.53 billion $3.03 48.34

Willis Towers Watson Public Limited Company has higher revenue and earnings than Arthur J. Gallagher & Co.. Arthur J. Gallagher & Co. is trading at a lower price-to-earnings ratio than Willis Towers Watson Public Limited Company, indicating that it is currently the more affordable of the two stocks.

Dividends

Arthur J. Gallagher & Co. pays an annual dividend of $1.56 per share and has a dividend yield of 2.7%. Willis Towers Watson Public Limited Company pays an annual dividend of $2.12 per share and has a dividend yield of 1.4%. Arthur J. Gallagher & Co. pays out 65.8% of its earnings in the form of a dividend. Willis Towers Watson Public Limited Company pays out 70.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Willis Towers Watson Public Limited Company has increased its dividend for 6 consecutive years. Arthur J. Gallagher & Co. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

82.7% of Arthur J. Gallagher & Co. shares are held by institutional investors. Comparatively, 92.8% of Willis Towers Watson Public Limited Company shares are held by institutional investors. 1.6% of Arthur J. Gallagher & Co. shares are held by company insiders. Comparatively, 6.7% of Willis Towers Watson Public Limited Company shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Arthur J. Gallagher & Co. and Willis Towers Watson Public Limited Company’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arthur J. Gallagher & Co. 7.42% 13.56% 4.37%
Willis Towers Watson Public Limited Company 5.24% 10.76% 3.62%

Analyst Recommendations

This is a summary of current ratings and target prices for Arthur J. Gallagher & Co. and Willis Towers Watson Public Limited Company, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arthur J. Gallagher & Co. 2 3 6 0 2.36
Willis Towers Watson Public Limited Company 2 1 9 0 2.58

Arthur J. Gallagher & Co. currently has a consensus target price of $57.00, suggesting a potential downside of 1.06%. Willis Towers Watson Public Limited Company has a consensus target price of $149.80, suggesting a potential upside of 2.27%. Given Willis Towers Watson Public Limited Company’s stronger consensus rating and higher probable upside, analysts clearly believe Willis Towers Watson Public Limited Company is more favorable than Arthur J. Gallagher & Co..

Volatility and Risk

Arthur J. Gallagher & Co. has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500. Comparatively, Willis Towers Watson Public Limited Company has a beta of 0.93, meaning that its stock price is 7% less volatile than the S&P 500.

Summary

Willis Towers Watson Public Limited Company beats Arthur J. Gallagher & Co. on 10 of the 17 factors compared between the two stocks.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co. and its subsidiaries are engaged in providing insurance brokerage and consulting services, and third-party claims settlement and administration services to both domestic and international entities. The Company operates through three segments: brokerage, risk management and corporate. The brokerage segment primarily consists of retail and wholesale insurance brokerage operations. Its retail brokerage operations negotiate and place property/casualty, employer-provided health and welfare insurance, and healthcare exchange and retirement solutions principally for middle-market commercial, industrial, public entity, religious and not-for-profit entities. The risk management segment provides contract claim settlement and administration services for enterprises that choose to self-insure some or all of their property/casualty coverages and for insurance companies that choose to outsource some or all of their property/casualty claims departments.

About Willis Towers Watson Public Limited Company

Willis Towers Watson Public Limited Company (Willis Towers Watson) is a holding company. The Company operates as a global advisory, broking and solutions company. It is engaged in offering risk management, insurance broking, consulting, technology and solutions, and private exchanges. The Company operates through eight segments: Willis International; Willis North America; Willis Capital, Wholesale & Reinsurance (CWR); Willis GB; Towers Watson Benefits; Towers Watson Exchange Solutions; Towers Watson Risk and Financial Services; and Towers Watson Talent and Rewards. The Willis GB segment comprises four business units: Property and Casualty, Transport, Financial Lines and Retail Networks. The Willis Capital Wholesale and Reinsurance segment includes Willis Re; Willis Capital Markets & Advisory; Willis’ wholesale business, and Willis Portfolio Underwriting Services. The Willis North America segment provides risk management, insurance brokerage and related risk services.

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