DCF Studio

    AON · NYQ · Financial Services

    Aon plc

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 423.15

    Market price

    USD 295.64

    Implied upside

    +43.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Value Per Share

    Perpetuity growth
    USD 423.15+43.1%
    Exit multiple
    USD 451.04+52.6%
    Market price
    USD 295.64

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn7bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 19.1bnUSD 21.3bnUSD 23.7bnUSD 26.3bnUSD 29.3bn+11.2%
    EBITUSD 5.4bnUSD 6.0bnUSD 6.7bnUSD 7.4bnUSD 8.3bn+11.2%
    NOPATUSD 4.4bnUSD 4.9bnUSD 5.4bnUSD 6.0bnUSD 6.7bn+11.2%
    Add depreciation & amortisationUSD 670.0mUSD 745.4mUSD 829.2mUSD 922.5mUSD 1.0bn+11.2%
    Less capital expenditureUSD -304.6mUSD -338.8mUSD -376.9mUSD -419.3mUSD -466.5m+11.2%
    Less increase in working capitalUSD -52.4mUSD -58.3mUSD -64.9mUSD -72.2mUSD -80.3m+11.2%
    Free cashflow to firmUSD 4.7bnUSD 5.2bnUSD 5.8bnUSD 6.4bnUSD 7.2bn+11.2%
    Discount factor0.96140.88870.82150.75930.7019-
    Present valueUSD 4.5bnUSD 4.6bnUSD 4.8bnUSD 4.9bnUSD 5.0bn+2.8%
    Present Value Of The ForecastUSD 23.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.772Reported 0.660, pulled toward 1.0 (Blume)
    Cost of equity9.25%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 62.7bn79.6% of capital
    Total debtUSD 16.1bn20.4% of capital, book value as a proxy
    Tax rate19.1%Effective, capped at statutory
    WACC8.18%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 423.15

    77% of EV

    Forecast FCFF, final year
    USD 7.2bn
    Capex at depreciation, working capital in reinvestment
    USD 7.2bn
    Less reinvestment at g/ROIC (11.2% of NOPAT)
    USD -814.4m
    Capitalised
    USD 6.4bn
    ROIC (reported)
    22.2%
    Terminal value, undiscounted
    USD 115.9bn
    Terminal value, discounted
    USD 81.3bn
    Enterprise value
    USD 105.1bn
    Less net debt
    USD 13.3bn
    Equity value
    USD 91.9bn

    Exit at 13.4x EBITDA

    Value per shareUSD 451.04

    79% of EV

    Terminal value, undiscounted
    USD 124.5bn
    Terminal value, discounted
    USD 87.4bn
    Enterprise value
    USD 111.2bn
    Less net debt
    USD 13.3bn
    Equity value
    USD 97.9bn

    Spread between methods: 6%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.18%568.36618.72682.59766.34881.09
    7.18%457.59488.18525.19570.91628.90
    8.18%379.99399.87423.16450.83484.31
    9.18%322.62336.16351.64369.56390.53
    10.18%278.48288.02298.74310.88324.76

    Outlined: this model. Green text: above today's price of 295.64. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.2%3.9%-7.3pp
    EBIT margin28.3%20.2%-8.0pp
    Discount rate8.2%10.3%+2.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.