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  • A General Insurance Brokers Story  [View article]
    Price-to-Book is a problem in comparing insurance brokers because of the differences between those who are in acquisition mode (lots of intangible assets) and those who are more reliant on internal growth (no so much intangile assets). Debt, if used, tends to be short term (5-7 years)

    Net income is similarly a problem versus EBITDA, because those in acquisition mode using debt, have lower net income than those who are not acquiring or those using stock in an anti-dilutive way.

    They all have similar potential for gross margins (15% to 20% generally) but at various times those margins are up or down. That can make price-to-sales a reasonable yardstick for longer term value comparison than current or trailing P/E.

    You can certainly look at P/B, but we think P/S, EV/EBITDA are better comparison tools most of the time.

    We like MMC too as a speculation on the sale of Putnam Funds. AOC was left out of our study, because they have so much risk assumption.
    Dec 14 08:42 am |Rating: 0 0
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