Marsh & McLennan (MRSH)

Total return at 5 years: 10.0%/year = 7.4% appreciation + 2.6% dividend. The target price ($252) is ex-dividend; the $27 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $240 · Multiples $225) exceeds the market price ($177).

Today — fairly valued: at $177 trades ~21.7% below its value discounted to today (~$225); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($252) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$143.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($177) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-0.8%/year) than we project (6.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$3.8 bn of owner earnings in year 5 (vs ~$5.3 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT (EV/NOPAT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM to 30-Jun-2026 (US$27,947M of revenue), taken from the XBRL rolling grid. TTM net income (US$3,980M) is depressed against the trend level by a litigation charge of US$425 million related to Greensill, recognized in the first half of 2026 and classified by the company itself as a non-GAAP item excluded from its adjusted earnings. Recent reported growth (FY2025 +10.3%, TTM +8.3%) is also inflated by the comparison with the McGriff acquisition (Nov-2024, US$7.75bn of consideration), whose inorganic contribution fades as the transaction's anniversary passes within the TTM window. The earnings release of 21-Jul-2026 (8-K, second quarter 2026) included no formal revenue or EPS guidance for the full year 2026 — this gap is declared explicitly, and the year-1 path is anchored to the underlying organic growth the company itself reports (Risk and Insurance 3-4%, Consulting 7-8% in the second quarter of 2026) plus a modest component of bolt-on M&A, normalizing from the inflated TTM. The TTM operating margin (21.6%) recovers gradually toward the pre-charge level (FY2024: 23.8%) and beyond, supported by the Thrive program (three years, 2025-2027, total cost ~US$500M, target annualized savings of US$400M from 2028). Share repurchases are material (~2% a year of count reduction, funded with operating cash: TTM US$2,924M of buybacks against TTM FCF of ~US$4,767M after dividends) and are modeled explicitly via sharesPath, with the cash surplus not accumulated (accumulateCash: false) given that the flow is returned almost in full.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $252 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $177, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $252 in 5 years plus $27 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $225. Against the current market price ($177), the margin of safety is 21.7% (trades below the maximum → there is margin) and the total return at that price would be 10.0% annually.

• Current multiple vs. band. 22× trailing-twelve-month after-tax operating income, above the top of the archetype band (22×).
• Base exit multiple. 19x on normalized earnings 5 years out, within the band.
• Estimated 5-year return. +10% annual in the base case, Fairly valued.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (97%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Strong, predictable operating cash flow, TTM US$5,078M.
• Return on capital. Well above the 10% bar given the capital-light model.
• Reinvestment runway. Continued complementary M&A and efficiency savings from the Thrive program.
• Earnings quality. TTM depressed by the Greensill litigation charge (one-off, US$425M).

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Marsh's revenue is generated through commissions and fees tied to the volume and value of insurance/reinsurance premiums placed (Risk and Insurance Services), and through fees and compensation based on assets under management in Consulting (Mercer Wealth). There is no single physical volume driver: the best available breakdown is by segment and geography, as reported by the company in its quarterly release.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Reported growth. TTM +8.3%, inflated by the comparison against the McGriff acquisition.
• Organic growth. Underlying 4-5%, consistent and disciplined.
• Segment mix. Marsh Management Consulting grows strongly (~13%); Guy Carpenter is flat.

• Stated market leadership. The company's own 10-K states it is the world's largest insurance broker, in 130 countries.
• Capital-light model. TTM capex ~1.1% of revenue; very low capital intensity.
• Revenue diversification. Commission, fee, contingent commission, and fiduciary interest reduce dependence on a single mechanism.
• Dependence on the insurance cycle. Revenue is sensitive to the level of premium rates in the insurance market.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• !Interest coverage (EBIT / interest)6.2x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 97% of ROIC
• !Value creation (ROIC − 10% bar)+4pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.9x — no over-investment
• !Float / working capitalConsumes cash $0.4 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 1.5% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Long-term debt. US$18,891M (Jun-2026), rising after McGriff and accelerated buybacks.
• Available cash. US$1,700M of the company's own cash, modest relative to the size of the debt.
• Interest coverage. TTM EBIT (US$6,042M) comfortably covers annualized net interest expense.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO track record. 40 years in the sector, with the company since 2016; leadership continuity.
• Equity ownership. Low in percentage terms (~0.4% for the executive group) but significant in absolute value.
• M&A track record. 102 acquisitions 2021-2025; successful integration so far, with goodwill impairment risk if performance diverges.

• No clear discount source identifiable: MRSH trades with institutional normalcy, no recent spin-off, no lack of analyst coverage, and no evident forced-sale event in the filing.
• TTM GAAP earnings are depressed by the Greensill litigation charge (US$425 million, recognized in H1 2026), which inflates the reported multiple relative to adjusted earnings, which the company excludes from its non-GAAP metrics.
• The Jul 21, 2026 earnings release did not include formal full-year 2026 revenue/EPS guidance, leaving some short-term uncertainty about the exact pace of the post-McGriff deceleration that the market may be pricing in cautiously.

It trades close to intrinsic value, far from the required margin of safety. With no missing-buyer or motivated-seller type discount source clearly identifiable in the filing, the current multiple above the archetype band suggests the market is paying a premium for the business's quality and leadership, rather than an evident value opportunity.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -1%/year (-7% total): the margin of safety protects the downside. The bull (+16%/year, +106% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Litigation and E&O. Uninsured exposure to errors-and-omissions claims, including the ongoing Greensill litigation.
• Cybersecurity. Handling of sensitive client data globally, with growing attack vectors.
• Regulatory. Exposure to privacy, AI, and sanctions regulation across dozens of jurisdictions.
• Competition for talent. Aggressive recruiting by private-capital-backed competitors.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 14% above the 10% bar, but the margin is limited (+22%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a multiple/growth of 3.7 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 7% (EBIT/EV) + ROIC 14% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -1% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -5%/yr, bull-scenario ceiling +13%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, switching costs, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -1%, within what we project (6%) — the story squares with the numbers.