MMC - Embedded Expectations Analysis - 2021 08 31
Marsh & McLennan Companies, Inc. (MMC:USA) currently trades above recent averages relative to UAFRS-based (Uniform) earnings, with a 23.8x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about revenue and earnings growth, margin expansion, and market share gains.Specifically, management may lack confidence in their ability to sustain record revenue and earnings performance, adjusted operating income growth, and margin expansion. In addition, they may have concerns about their approach to M&A and the growth potential of Mercer, and they may be overstating the opportunities in the Career business. Moreover, management may lack confidence in their ability to manage expenses, capitalize on opportunities in areas such as digital and small commercial, and maintain net new inflows and market gains. Furthermore, they may lack confidence in their ability to provide differentiated high-quality solutions to their clients and mitigate losses in reinsurance programs.
Marsh & McLennan Companies is a holding company. Through its subsidiaries, the company provides clients advice and solutions in risk, strategy and people. The company provides analysis, advice and transactional capabilities to clients. The company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions) as well as insurance and reinsurance broking and services; and Consulting, which includes health, wealth and career services and products, and other management, economic and brand consulting services.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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