Ryan Specialty Holdings

Ryan Specialty Holdings Inc earns a 5-star quantitative star rating, illustrating our stance that this share class offers a compelling opportunity for investors. The stock currently trades at a 24% discount to our quantitative fair value estimate of $50.22 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's balance sheet bolsters our quantitative valuation. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. Reflecting the firm's leverage is its EBITDA/interest coverage ratio of 3.6, which lies in the bottom 30% globally. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be cheap.

The firm's profitability is an additional encouraging factor. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. The firm's enterprise value to free cash flow ratio of 11.0, for example, lies in the bottom 20% compared with global peers. This can be a sign of operational efficiency and potential for the company to fund growth, pay dividends, or reduce debt without needing additional capital. This characteristic further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has been a laggard relative to the broader universe over the past year. This underperformance makes the stock appear cheap, which portends a buying opportunity in light of other contributors to our model.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.