AON

Analysis of AON Stock

Technical Analysis AON has shown weak performance, declining over recent months and significantly underperforming the broader market. Trading near the lower end of its 52-week range suggests oversold conditions, with a notable maximum drawdown exceeding 20% highlighting downside volatility. While near-term pressure persists, the oversold position could present a potential entry point for patient investors.

Fundamentals AON exhibits solid revenue and robust profit margins, reflecting operational strength and cost discipline. However, low asset turnover and a high days sales outstanding indicate inefficiencies in capital utilization and working capital management. The company’s moderate leverage is balanced by a low cash ratio, signaling adequate but not exceptional liquidity.

Valuation & Peer Comparison AON trades at elevated valuation multiples, including high P/E and P/B ratios, suggesting significant overvaluation relative to earnings and book value. The lack of available industry benchmarks makes it difficult to determine whether this premium is justified by sector norms or represents an outlier, adding uncertainty to the valuation assessment.

Risk Assessment The stock’s beta below 1 implies lower volatility than the market, though historical drawdowns underscore meaningful downside risk. The absence of significant short interest may reflect market confidence but does not negate exposure to cyclical pressures in the insurance brokerage sector.

Investment Recommendation

AON demonstrates strong profitability and a potentially oversold technical position, but its high valuation and operational inefficiencies raise concerns. Investors seeking stability in a lower-volatility name may find the current dip appealing, yet the steep multiples limit margin of safety. Given mixed signals, a cautious approach is warranted—monitoring for improvements in efficiency or a more attractive entry point would be prudent. Not investment advice, for reference only.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for AON stock:

Over the next 12 months, the key potential catalyst is a technical rebound from the stock's current oversold condition, which could be fueled by its demonstrated operational strength and robust profit margins. The primary risks include its persistent high valuation multiples creating a low margin of safety, inefficiencies in working capital management, and susceptibility to cyclical pressures in the insurance brokerage sector. Given the lack of a specific analyst target price, a cautious approach is advised; while a reversion towards its historical mean is plausible, significant upside may be limited until valuation aligns more closely with fundamentals or operational efficiency improves.

Wall Street Consensus

Most Wall Street analysts are optimistic about AON's 12-month outlook, with consensus target around $346.00, indicating expected upside potential.

Overall, AON has investment potential but also faces challenges. Here are key factors to weigh before investing.

AON has demonstrated weak performance with a notable decline over the recent quarter. The stock is currently trading near the lower end of its 52-week range, reflecting persistent downward pressure.

Over the past one and three months, AON has declined by 0.81% and 4.39% respectively, significantly underperforming the broader market by 7.76%. This underperformance and the stock's beta below 1.0 indicate it has offered weaker returns with somewhat lower volatility compared to the market average.

Currently trading at $344.59, AON sits approximately 16.6% above its 52-week low but significantly below its high, suggesting the stock is in an oversold condition. This is further supported by the substantial maximum drawdown of over 20% witnessed during the past year.

Revenue & Profitability AON delivered solid revenue of $4.0 billion in Q3 2025, showing a slight sequential decrease from Q2's $4.16 billion. The company maintained a robust net profit margin of 11.76%, which, while strong, reflects a moderation from the 13.94% margin posted in the previous quarter. Profitability remains healthy, underpinned by effective cost management relative to its top line.

Financial Health The company's financial health is characterized by moderate leverage, with a debt-to-equity ratio of 2.22 and a manageable debt ratio of 34.1%. While the interest coverage ratio of approximately 4.0 provides a sufficient buffer for interest obligations, the cash ratio is notably low at 0.04, indicating limited liquid assets relative to current liabilities. Operating cash flow generation appears adequate to support ongoing operations.

Operational Efficiency Operational efficiency shows mixed signals, with a respectable return on equity (ROE) of 5.92% for the quarter. However, the asset turnover ratio is low at 0.077, suggesting that the company is generating a relatively modest amount of sales from its asset base. The high days sales outstanding (DSO) of nearly 339 days points to a lengthy collection cycle for receivables, which is a key area for potential improvement in working capital management.

Valuation Level: AON appears significantly overvalued based on traditional valuation metrics across multiple measurements. The stock trades at elevated multiples with a TTM PE of 27.1, a forward PE of 40.9, and exceptionally high PB (9.28) and PS (4.42) ratios that suggest substantial price premiums relative to the company's earnings, book value, and revenue. The alarmingly high EV/EBITDA of 92.6 and negative PEG ratio reinforce this overvaluation picture, indicating investors are paying substantial premiums for current operations and future growth expectations.

Peer Comparison: Industry benchmark data is unavailable for comparative analysis against insurance brokerage sector peers. Without industry average metrics for PE, PB, and PS ratios, it's challenging to contextualize whether AON's premium valuation is justified relative to competitors or represents an outlier position. This absence of industry context limits definitive conclusions about AON's relative valuation standing within its market segment.

Volatility Risk: AON exhibits moderate volatility risk, with a beta of 0.835 indicating it is generally less volatile than the broader market. However, the one-year maximum drawdown of -20.34% demonstrates a capacity for significant peak-to-trough declines, suggesting investors should be prepared for potential downward swings despite the stock's lower beta.

Other Risks: The absence of a reported short interest can imply a consensus bullish sentiment or limited perceived downside catalysts from short sellers. While this may reflect market confidence, it does not eliminate fundamental sector-specific risks such as economic cycles impacting AON's core insurance brokerage and consulting operations.