RYAN: Mixed Signals, What's Next for Ryan Specialty?

Ryan Specialty is an international specialty insurance firm offering products and solutions for insurance brokers, agents, and carriers. The company acts as a wholesale broker and managing underwriter, providing distribution, underwriting, product development, administration, and risk management services. Its offerings are categorized into three specialties: Wholesale Brokerage operating primarily under the 'RT Specialty' brand, Binding Authority also under the 'RT Specialty' and 'RT Binding Authority' brands, and Underwriting Management referred to as 'Ryan Specialty Underwriting Managers'. Ryan Specialty targets retail insurance brokers seeking expertise in specialty lines and insurance carriers needing efficient distribution and underwriting management. The company differentiates itself by providing best-in-class intellectual capital, leveraging trusted relationships, and developing differentiated solutions at a scale unmatched by many competitors, focusing on the growing 'E&S' market.

RYAN's technical outlook appears mildly bearish. The stock has experienced a significant decline over the past 90 days, falling from approximately $68 to the recent close of $55.03. Although there was a strong positive move on the final day, this is insufficient to offset the prevailing downtrend. The price is currently below its 21-day EMA ($53.57) and 50-day SMA ($54.41), reinforcing the bearish sentiment. The 200-day SMA is $64.04. Momentum indicators also suggest weakness. The MACD (-0.74) is below its signal line (-0.76), and the RSI (47.90) is below 50, indicating continued bearish momentum. The ADX (17.44) suggests the downtrend is not particularly strong, but the negative directional movement (DMN) is higher than the positive directional movement (DMP), indicating a bearish bias. The stochastic oscillator is showing a recent uptick, but the overall trend is still downward. The ROC20 is negative. The recent price action indicates a potential for continued downward pressure in the short to medium term.

Ryan Specialty's MD&A reveals a company experiencing substantial revenue growth, fueled by both organic expansion and strategic acquisitions. Total revenue for the three months ended September 30, 2025, increased by 24.8% to $754.6 million, with organic revenue growth contributing 14.2% ($85.7 million) and acquisitions adding 9.1% ($55.3 million). For the nine-month period, total revenue rose by 24.2% to $2,299.9 million. The adjusted EBITDAC margin remained relatively stable, at 31.2% for the quarter and 32.4% for the nine-month period. However, net income for the nine months ended September 30, 2025, decreased by $4.4 million to $182.9 million. The company has been actively pursuing acquisitions, as evidenced by the $636.9 million spent on 'Business combinations' during the nine months ended September 30, 2025. Interest expense, net increased $59.3 million or 53.9% for the nine months ended September 30, 2025, compared to the same period in the prior year, driven by increased debt from recent acquisition activity. The company expects to fund future TRA payments with tax distributions from the LLC that come from cash on hand and cash generated from operations.

Ryan Specialty's Q2 2025 earnings call presents a moderately bullish outlook, tempered by property market headwinds and increased investments. While total revenue grew 23%, driven by 7.1% organic growth and M&A contributions, management acknowledged that organic revenue growth 'fall short of our expectations'. The company is now 'guiding to organic revenue growth of 9% to 11%' for the full year, revised down due to significant property pricing declines. Despite this, management maintains a positive tone, emphasizing strong performance in casualty and delegated authority specialties, as well as new business wins. They are also making strategic investments in Ryan Re and Alternative Risk, which are expected to generate 'significant new business, organic growth and margin benefits' starting in 2026. The company's robust M&A pipeline and focus on talent acquisition further support a positive long-term trajectory. Although property market softness presents a near-term challenge, Ryan Specialty's diversified platform and strategic initiatives position it for continued growth and market leadership.

RYAN's financial performance presents a somewhat bearish outlook. While revenue has generally increased from $558.59M in Q1 2024 to $754.58M in Q3 2025, the gross profit ratio has shown considerable volatility, decreasing from 0.95 in Q4 2023 to 0.42 in Q3 2025, indicating increasing cost of revenue. Operating cash flow, while positive at $169.66M in the most recent quarter (Q3 2025), has been inconsistent, with a significant negative value of -$116.54M in Q1 2024, suggesting potential cash flow management issues. The company's total debt has increased substantially from $2,149.23M in Q1 2024 to $3,575.02M in Q3 2025, reflecting a significant increase in leverage and potentially higher interest expenses in the future. This combination of fluctuating profitability, variable cash flow, and increased debt raises concerns about the company's financial stability and future performance.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.