Over the past six months, Marsh’s shares (currently trading at $176.36) have posted a disappointing 5.9% loss, well below the S&P 500’s 8.4% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is this a buying opportunity for MRSH? Find out in our full research report, it’s free.
Why Are We Positive on MRSH?
With roots dating back to 1871 and a presence in over 130 countries, Marsh (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. Luckily, Marsh’s sales grew at an impressive 9.3% compounded annual growth rate over the last five years. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
With $27.52 billion in revenue over the past 12 months, Marsh 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
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Marsh 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 15.9% over the last five years.
Final Judgment
These are just a few reasons why we think Marsh is a high-quality business. With the recent decline, the stock trades at 16.2× forward P/E (or $176.36 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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