Aon's high debt level makes it unattractive despite strong fundamentals.

Aon's stock fell by 20%, while

Finally, the company you may have heard of the least unless you work in the world of finance and insurance, but which may be the most interesting, is Aeon. It is sitting less than 1% above its 52- week low, down about 23%.

So, what does Aeon actually do ? Well, it's very simple. It is the intermediary for risks. When a giant corporation needs insurance or assistance with employee health and pension plans, Aeon is the expert consultant who arranges it all and gets a commission.

In other words, they are their sales representatives. But they sit there and say they are managing the risks. She already has large arms. One for insurance and another for employee benefits and retirement.

And here lies the beauty. " Ion" does not bear the insurance risks itself. She only charges for providing advice. In other words, for sale.

So why did the stock price drop? Well, the reason is market concern about slowing growth. For a few years, insurance prices have been rising sharply. Aon receives a commission.

Therefore, when prices rise, Aon's fees rise with them. Simply put, it's easy money. But those prices stopped rising. This easy incentive has faded away. Aon's growth has slowed slightly.

There is nothing to worry about . But Wall Street hates uncertainty. A slowdown in growth was all it took to lower the stock price.

And now , here's the optimistic viewpoint. Firstly, it is a company with incredible customer loyalty. Giant companies rarely dispense with their insurance broker because Aon knows all about their risks, so customers stay for years , giving Aon predictable recurring revenue .

Secondly, the world is becoming more complicated day by day. Cyberattacks, climate, volatile weather, new regulations, and artificial intelligence. And every new risk means more work for Aon, which is even investing in AI-powered analytics to provide smarter advice and win more business.

Third, even in the last quarter, its underlying sustainable growth reached 5%. Its profit margins have expanded, and it distributed $600 million to shareholders in share buybacks in just one quarter.

The classic recipe for a company that achieves quiet, cumulative growth .

And of course, there is the pessimistic viewpoint. With insurance premium payments fading , Aon has to work harder to grow. Its reported growth appeared to be only 2% in the last quarter, although this was mainly due to the sale of a subsidiary, rather than a real weakness.

It has also made a major acquisition that it still has to prove worthwhile, and it carries a large amount of debt, around $15 billion , which limits its flexibility.

So, the real question is: Can Aon continue its cumulative growth once the favorable, easy winds have completely disappeared? Guys, Aon is a $60 billion company. Now, here's what I don't like.

The value of the organization is $102 billion. This means $42 billion in debt, and they generated only $3.2 billion in free cash flow last year, and $2.9 billion in total.

This is not an insurance company. This is a brokerage firm, so it operates like any other regular company. This is a very large amount of debt for an average company.

Yes, they have good returns on capital, 14% last year, and 24% annually over the past five years, with few acquisitions, and a growing profit margin that reached 16.5% over the last decade, 18% over the last five years , and 22% last year.

However, this level of debt is very, very high .

The company is being sold at 18 times its free cash flow and 15 times its earnings, but this level of debt is very large. Guys, I don't usually like looking at companies that have a lot of debt, especially at this level.

This only indicates a 6.3 times their free cash flow . They may have a lot of ongoing obligations that they owe in the form of commissions or something like that, but I don't like that at all.

Apart from that, basically everything is, I mean, very good. The price is 22.77. Everything else is not bad in the first place. However, they also had less free cash flow last year than last year's net income , but their five-year free cash flow is higher than their five-year net income.

So, let's see what the analysts are saying about this . Acceptable growth here. Earnings growth of 12%, 11.5%, 11.5%, and then one analyst has earnings and revenue growth of 3.85%.

Not much. 4 to 6% . Nothing worth mentioning, guys.

So, let's move on to our stock analysis tool, as I'm doing this for the first time here. This is exciting. Now, guys, as I said , high returns on capital. Regarding revenue growth, 3, 5 and 7% are not attractive trades.

For profit margin, I would set 16, 18, and 20. I would do the same for free cash flow. Their price-to- earnings ratio is high, and they have a lot of debt now . I might factor that into my safety margin by getting a higher return, but I look at this and see that they have high returns on capital, and they are big.

I will give them a bonus. The question is, how large is this bonus? 16, 19 and 22.

The debts keep stuck in my mind. That's why I feel a little uneasy . This is what I find difficult when looking at companies like these.

Okay guys, I pressed the analyze button. The stock price is currently 280. I have a low price of 200, a high price of 420, and an average price of 293. So, it is below the average price, but it shows a return of only 10% based on my average assumption.

So, it's not a very attractive deal in my opinion.