AON

We rate Aon plc (AON) as Avoid with a composite score of 36.3/100 at a current price of $319.33. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (65th percentile) and investment (38th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (21th percentile) and quality (26th percentile) tempers our overall conviction. We assign a Narrow Moat rating (51/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Aon plc holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 36.3/100 places it at rank #3978 in our full 7,333-stock universe. With a $73.1B market capitalization, Aon plc operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 12%, though momentum at the 21th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 22% (+5.2pp vs sector) and net margins of 14.1%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $319.33, Aon plc is trading at a premium to fundamental value. Our value factor score of 35/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 29.0x (a 143% premium to the sector median of 11.9x), EV/EBITDA of 22.6x (at a premium), P/B of 7.4x, P/S of 4.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Aon plc. The stock presents a balanced risk profile: significant leverage (161% debt-to-equity) and weak quality scores (26th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (161% debt-to-equity); weak quality scores (26th percentile); low beta of 0.32 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 65th percentile and quality factor at the 26th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (65th percentile) suggests predictable business dynamics; large-cap scale ($73.1B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Aon plc's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 25.4%, and the balance sheet is managed within acceptable parameters (D/E: 161%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Aon plc falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.80% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Aon plc receives a Avoid rating with a composite score of 36.3/100 (rank #3978 of 7,333). Our quantitative framework assigns a Narrow Moat (51/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 37/100.

Our analysis does not support a constructive view on Aon plc at this time. The combination of the current quantitative profile, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.