Marsh & McLennan Companies, Inc. (MMC)

mdabat (43.70) Submitted: 6/28/08 8:24 AM : Start Price: $26.33 MMC Score: -32.56

After reviewing the financial statements of MMC, ive decided to stay away from its stock, as well as warn others about the stock, especially since many people are bullish about it

First of all, the company boasts impressive ROE (26.55%), ROA (12.12%), and Net Margins (17.24%). However we need to dig deeper into the numbers. The first warning signal i got was MMC's stagnant sales, the company's sales 5 year growth average is at 0.59%. This means that the company has been extracting profits through a source other than sales. The second warning signal comes when i compared the operating margin (4.8%) to the net margin (17.24%). This showed me that profits were not generated from MMC's core business.

By reviewing the income statement, i realized that MMC's increase in net margins is due to "discontinued operations", and this is a very bad sign. This is shown in the EPS and P/E ratio. If we look at the diluted EPS, we get a value of 3.66 and a P/E ratio of 7.3, however by using the more reliable EPS from 'continuing operations', we get an EPS of 0.17 and therefore, a P/E ratio of 157.5

In a nutshell, avoid this stock and such financial fakery and save your money for a more worthwhile investment!

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