Aon plc (AON): what the price requires
At today's price, Aon plc (AON) is priced for +10.9% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/AON
Headline
| Field | Value |
|---|---|
| Ticker | AON |
| Company | Aon plc |
| Current price | $366.56/sh |
| Composition | Commercial Risk Solutions 49% / Reinsurance Solutions 16% / Health Solutions 22% / Wealth Solutions 12% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | fee-financial |
| Implied earnings growth | 10.9% |
| Price-to-earnings | 30.2x |
| Earnings yield | 3.3% |
Solve inputs: computed at a 8.6% cost of equity with 4% terminal growth over a 5-year stage, on a 5-year median GAAP earnings base; each 1pp of cost of equity moves the implied earnings growth ~5.3pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.05σ |
| cohort percentile (of 49 peers) | 84 |
| sustained it ~5 years at this level | 51% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.66x | 3 | expensive |
| Earnings | 1.78x | 2 | expensive |
| Relative | 0.82x | 3 | justifies |
| Growth | 1.08x | 1 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.
Per-Model Detail (n=9)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| Bank Fair Value (P/TBV) | — | $245.41 | 1.49x | yes | TBVPS $46.23 × 5.31x (ROE (TTM) 27.6% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption)) |
| Relative Valuation | Relative | $221.14 | 1.66x | yes | P/E 16.33x (blended: static sector reference 11x + trailing (TTM) 29x), scenarios: 13.6x / 16.3x / 19.1x (bear / base = reference held flat / bull), EV/EBITDA 12.83x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $137.74 | 2.66x | yes | BV/sh $46.23, ROE (TTM) 27.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $241.98 | 1.51x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $338.12 | 1.08x | yes | Rev $17.5B, growth 7% (input: historical growth; tapered), Terminal P/S: 3.8x / 4.5x / 5.3x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $444.51 | 0.82x | yes | EPS $12.70, growth 35% (input: historical EPS growth), PEG=0.82 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | $114.94 | 3.19x | yes | √(22.5 × EPS $12.70 × BVPS $46.23) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $409.80 | 0.89x | yes | EPS $12.70 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | — | — | no | — |
| PEG Fair Value | Relative | $476.26 | 0.77x | yes | EPS $12.70 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $137.30 | 2.67x | yes | EPS $12.70 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $15.0b |
| Net debt / NOPAT (after-tax) | 3.86x |
| Net debt / operating income (pre-tax) | 3.08x |
| Interest coverage | 6.0x |
| Share count CAGR (buyback) | -0.1% |
| Burning cash | no |
Bullet Takeaways
- Aon is one of the two largest global insurance brokers, earning commissions and fees across commercial risk, reinsurance, health, and wealth, with commercial risk alone about half of revenue and growing fastest.
- The economics are unusually attractive: a near-39% adjusted operating margin on recurring brokerage revenue, which is why the static asset and earnings lenses understate a business whose value is the fee annuity, not the balance sheet.
- The risk is the debt taken on for the NFP acquisition, roughly $15 billion of net debt, set against a price that already credits steady high-single-digit fee-earnings growth at a premium multiple.
Bull Case
What traditional valuation models miss about Aon is that the balance sheet is the wrong place to look for its value. An asset-based lens reads a broker as light on tangible assets and concludes the price is rich, but Aon's value is not its assets, it is the recurring fee and commission stream it earns standing between clients and the insurance market. The filing describes Commercial Risk Solutions using "Risk Capital's extensive data and analytics capabilities to provide brokerage and consulting services that help organizations develop, improve, and implement their risk management strategies," which is a relationship-and-expertise business, not a capital-intensive one. The right way to value it is the fee annuity it throws off, and on that basis the picture is far stronger than the asset lens suggests.
The economics of that annuity are exceptional. The most recent quarter delivered an adjusted operating margin of 39.1%, up 70 basis points, on 5% organic revenue growth, with commercial risk growing 7% in its fourth consecutive quarter at 6% or higher. A near-39% margin on largely recurring revenue is the signature of a business with pricing power and operating leverage, and consistent mid-to-high-single-digit organic growth shows the demand is steady rather than cyclical. Free cash flow surged to $363 million in the quarter, and the company reaffirmed full-year guidance for mid-single-digit-or-greater organic growth and continued margin expansion.
The four-segment structure gives Aon diversification and a deliberate efficiency program on top. Commercial risk, reinsurance, health, and wealth each serve different client needs and economic drivers, so a soft patch in one is buffered by the others, and the recent quarter showed broad-based growth across them. Management is also executing a restructuring program targeting $100 million of savings in 2026 toward a $450 million goal by 2027, which feeds directly into the margin expansion the guidance promises. A high-margin, diversified fee business growing steadily and taking out cost is exactly the kind of compounder the asset lens cannot see.
Bear Case
The cleanest frame for the bear case is the disagreement among the valuation methods, and the conservative ones are flagging the same thing. The asset-value and earnings-power lenses both read Aon's price as expensive; only the relative-multiple and growth-discounted-cash-flow lenses justify it, and the growth method does so by crediting the steady fee-earnings compounding the price assumes. When the static methods say expensive and only the forward-looking ones defend the level, the honest reading is that the price has already paid for the growth, leaving little room if it slows. At about 26 times earnings, the multiple sits in the upper half of the broker peer group, so the premium is real and the bar to clear it is set high.
The debt is the structural pressure the bull case has to carry, and it is recent. Aon took on substantial leverage to fund its NFP acquisition, with the filing documenting that "Aon North America, Inc. drew its $ 2 billion delayed draw term loan" alongside senior notes to pay the cash consideration. Net debt now sits near $15 billion, about 3.25 times operating income, with interest coverage around 5.8 times. That is manageable while organic growth and margins hold, but it is a real claim on the cash flow that funds buybacks and dividends, and it raises the stakes on the integration: if NFP's middle-market expansion underdelivers, the company is left servicing acquisition debt without the growth that justified it.
The revenue base is also more exposed to forces outside Aon's control than its steady margins suggest. The filing is explicit that commissions are "paid to us out of the premiums that insurers and reinsurers charge our clients," and that Aon has "no control over premium rates," so its revenue rises and falls partly with the insurance pricing cycle. A soft market with falling premium rates pressures commission revenue even if Aon retains every client. Combine that cyclicality with the acquisition debt and a premium multiple that only the growth methods support, and the bear case is straightforward: the price assumes steady high-single-digit fee growth continues uninterrupted, and several of the variables that drive it are not Aon's to set.
Valuation
An insurance broker is worth the fee earnings it generates, not its book value, so the right lens is price-to-earnings on the fee annuity. At about 26 times earnings, a 3.8% earnings yield, the price implies Aon grows its fee earnings around 7.8% a year. Against the company's own record that pace is within what it has delivered, and against its broker peers the multiple lands in the upper half of the group. The market is paying a premium price for a premium business, betting that the steady high-single-digit fee growth continues.
The methods we use to triangulate split, and the split is the bet. The asset-value and earnings-power lenses read the price as expensive, which is expected for a capital-light broker whose value is its fee stream rather than its assets, and whose current earnings, capitalized statically, do not reach the price. Only the relative-multiple and growth-discounted-cash-flow lenses justify the level, the latter by crediting the forward fee compounding. So the price is defended by the forward-looking methods and questioned by the static ones, which is the classic shape of a quality compounder trading at a premium: the durability of the growth is the whole question, and the static frames structurally cannot price it.
Solvency is the load-bearing constraint and belongs in the close, because the NFP acquisition changed the balance sheet. Net debt near $15 billion, about 3.25 times operating income with interest coverage around 5.8 times, is the real claim on the fee annuity, and it is the reason the premium valuation is not risk-free: the debt service competes with the buybacks and dividends that capital-light brokers usually return. As a fee business, Aon is not read on cash burn or the usual operating-leverage math; its strength is the recurring commission stream and its constraint is the acquisition debt against it. The decisive fact is not the growth rate alone; it is whether Aon sustains high-single-digit organic fee growth and expanding margins long enough to both service the NFP debt and justify a multiple at the top of its peer group.
Catalysts
The first-quarter 2026 print beat and the stock rose on it. Revenue reached $5.03 billion, reported EPS rose 14% to $6.48, adjusted operating margin expanded 70 basis points to 39.1%, and free cash flow surged to $363 million, all on 5% organic revenue growth in line with guidance. Commercial risk led with 7% organic growth, its fourth consecutive quarter at 6% or higher, while reinsurance and health each grew 4%. The breadth and the margin expansion together are what the premium valuation needs to see continue.
The forward catalysts are the organic-growth cadence, the margin program, and the NFP integration. Aon reaffirmed full-year 2026 guidance for mid-single-digit-or-greater organic revenue growth, 70 to 80 basis points of adjusted operating margin expansion, and double-digit free cash flow growth, and expects $100 million of restructuring savings in 2026 on the way to a $450 million target by 2027. The watch list is whether commercial risk holds its high-single-digit organic pace, whether the margin expansion lands as guided, and whether free cash flow growth keeps pace with the NFP acquisition debt, since that combination determines both the deleveraging and the capital return the price assumes.
Peer Cohorts (Per Segment, With Filing Citations)
Risk Capital (reported)
- MRSH (Marsh & McLennan Companies, Inc.)
- (no filing in the citation store)
- WTW (WILLIS TOWERS WATSON PLC)
- (no filing in the citation store)
- AJG (ARTHUR J. GALLAGHER & CO.)
- (no filing in the citation store)
- BRO (BROWN & BROWN, INC.)
- (no filing in the citation store)
- RYAN (RYAN SPECIALTY HOLDINGS, INC.)
- (no filing in the citation store)
- BWIN (The Baldwin Insurance Group, Inc.)
- (no filing in the citation store)
Human Capital (reported)
- MRSH (Marsh & McLennan Companies, Inc.)
- (no filing in the citation store)
- WTW (WILLIS TOWERS WATSON PLC)
- (no filing in the citation store)
- AJG (ARTHUR J. GALLAGHER & CO.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Aon Q1 2026 results, 8-K · Aon Q1 2026 earnings call, May 2026 · Aon Q1 2026 results and earnings call, May 2026