Why Brown & Brown Stock Is Rated a "Buy With Caution" Before Earnings

by Rob Otman
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Brown & Brown (NYSE: BRO) is a mid-cap company that operates within the insurance industry. Its market cap is $7 billion today, and the total one-year return is 16.33% for shareholders.

Brown & Brown stock is underperforming the market. It's beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Brown & Brown reported a recent EPS growth rate of 11.11%. That's below the insurance industry average of 117.7%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the insurance industry is 36.28. And Brown & Brown's ratio comes in at 22.07. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for Brown & Brown stock is 43.88%. That's below the insurance industry average of 53.53%. The company is less leveraged.

Free Cash Flow per Share Growth Brown & Brown's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Brown & Brown comes in at 15.07% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Brown & Brown's profit margin is above the insurance average of 8.88%. So that's a positive indicator for investors.

Return on Equity Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Brown & Brown is 11.21%, and that's below its industry average ROE of 12.28%.

Brown & Brown stock passes four of our six key metrics today. That's why our Investment U Stock Grader rates it as a Buy With Caution.

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you're interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It's a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more.

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