What is WLTW's Intrinsic value?

Willis Towers Watson PLC (WLTW) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Willis Towers Watson PLC's estimated intrinsic value ranges from $122.95 to $298.20 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $122.95 -46.9%
Dividend Discount Model (Stable) $298.20 +28.8%

Is Willis Towers Watson PLC (WLTW) undervalued or overvalued?

With the current market price at $231.56, the stock appears to be moderately overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Willis Towers Watson PLC's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 0.74 0.86
Cost of equity 6.3% 8.7%
Cost of debt 5.0% 5.0%
Tax rate 19.1% 22.8%
Debt/Equity ratio 0.19 0.19
After-tax WACC 6.0% 7.9%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 12.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.5%
  • Long-term growth rate: 1.0%
  • Fair value: $122.95 (-46.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.7% (Low) to 6.3% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $187 to $409
  • Selected fair value: $298.20 (28.8% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $29860M
Enterprise Value $32352M
Trailing P/E 9.86
Forward P/E 26.22
Trailing EV/EBITDA 0.00
Current Dividend Yield 121.23%
Dividend Growth Rate (5Y) 14.83%
Debt-to-Equity Ratio 0.19

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $24.59
Dividend Discount Model (Stable) 43% $44.73
Weighted Average 100% $198.06

Investment Conclusion

Based on our comprehensive valuation analysis, Willis Towers Watson PLC's weighted average intrinsic value is $198.06, which is approximately 14.5% below the current market price of $231.56.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.19)
  • Historical dividend growth of 14.83%

Given these factors, we believe Willis Towers Watson PLC is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.