AJG WACC - Weighted Average Cost of Capital
The WACC of Arthur J Gallagher & Co (AJG) is 7.1%.
| Range | Selected | |
| Cost of equity | 6.6% - 8.4% | 7.5% |
| Tax rate | 10.4% - 16.9% | 13.65% |
| Cost of debt | 4.3% - 4.9% | 4.6% |
| WACC | 6.3% - 7.9% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.6 | 0.64 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.6% | 8.4% |
| Tax rate | 10.4% | 16.9% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 4.3% | 4.9% |
| After-tax WACC | 6.3% | 7.9% |
| Selected WACC | 7.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AJG | Arthur J Gallagher & Co | 0.15 | 0.42 | 0.37 |
| AON | Aon PLC | 0.22 | 0.26 | 0.22 |
| BRO | Brown & Brown Inc | 0.12 | 0.41 | 0.37 |
| BRP | BRP Group Inc | 0.34 | 0.95 | 0.74 |
| EHTH | eHealth Inc | 0.44 | 0.64 | 0.46 |
| FANH | Fanhua Inc | 0.35 | -0.35 | -0.27 |
| GOCO | Gohealth Inc | 2.51 | 0.96 | 0.31 |
| GSHD | Goosehead Insurance Inc | 0.02 | 0.36 | 0.35 |
| SLQT | SelectQuote Inc | 1.49 | 1.21 | 0.54 |
| WLTW | Willis Towers Watson PLC | 0.19 | 0.77 | 0.66 |
| Low | High | |
| Unlevered beta | 0.36 | 0.41 |
| Relevered beta | 0.4 | 0.46 |
| Adjusted relevered beta | 0.6 | 0.64 |
AJG's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for AJG:
cost_of_equity (7.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.6) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.