MRSH

Marsh & McLennan is a textbook quality compounder: FY2025 revenue of $27.0B grew 10.3% (4% underlying per the MD&A), operating income rose 7% to $6.22B, and the franchise throws off a 23.1% operating margin, 15.4% net margin, and a 27.2% return on equity. Revenue has climbed every year from $20.7B (FY2022) to $27.0B (FY2025), and operating cash flow jumped 23% to $5.29B against just $291M of capex — this is an asset-light, fee-driven brokerage that converts earnings to cash exceptionally well and returns it (combined $2.01B buybacks + $1.70B dividends, with the January 2026 dividend raised to $0.90/share). The balance sheet is sound: $15.3B equity (+13.2%), $2.69B cash, and long-term debt down 5.7% to $18.3B. This is a durable, recession-resistant business — the kind of compounding you hold for years, not trade.

The catch is the gap between business quality and the rate of forward growth being paid for. Diluted EPS rose only 3.1% to $8.43 (the MD&A confirms $8.43 vs $8.18), and net income grew just 2.5% — well below the 10% headline revenue figure, because most of that growth was acquired, not organic. The MD&A is explicit that the 10% reported revenue gain was only 4% underlying; the rest came from the $7.75B McGriff acquisition (closed Nov 2024) plus 20 deals for $857M in 2025. At $162.41 the stock trades at 19.3x trailing EPS — a full multiple for a business compounding underlying revenue at ~4% and EPS at ~3%. You are paying a premium price for premium quality, with the upside already largely discounted.