DCF Studio

    WTW · NMS · Financial Services

    Willis Towers Watson Public Limited Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 294.76

    Market price

    USD 309.98

    Implied upside

    -4.9%

    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 294.76-4.9%
    Exit multiple
    USD 297.41-4.1%
    Market price
    USD 309.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.0bnUSD 10.3bnUSD 10.6bnUSD 11.0bnUSD 11.3bn+3.1%
    EBITUSD 2.0bnUSD 2.1bnUSD 2.2bnUSD 2.2bnUSD 2.3bn+3.1%
    NOPATUSD 1.7bnUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 1.9bn+3.1%
    Add depreciation & amortisationUSD 515.8mUSD 531.6mUSD 547.9mUSD 564.8mUSD 582.1m+3.1%
    Less capital expenditureUSD -242.1mUSD -249.6mUSD -257.2mUSD -265.1mUSD -273.3m+3.1%
    Less increase in working capitalUSD -179.2mUSD -184.7mUSD -190.4mUSD -196.3mUSD -202.3m+3.1%
    Free cashflow to firmUSD 1.8bnUSD 1.8bnUSD 1.9bnUSD 2.0bnUSD 2.0bn+3.1%
    Discount factor0.96430.89670.83380.77530.7210-
    Present valueUSD 1.7bnUSD 1.7bnUSD 1.6bnUSD 1.5bnUSD 1.5bn-4.2%
    Present Value Of The ForecastUSD 8.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.609Reported 0.417, pulled toward 1.0 (Blume)
    Cost of equity8.35%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 28.8bn80.7% of capital
    Total debtUSD 6.9bn19.3% of capital, book value as a proxy
    Tax rate16.6%Effective, capped at statutory
    WACC7.54%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 294.76

    76% of EV

    Forecast FCFF, final year
    USD 2.0bn
    Capex at depreciation, working capital in reinvestment
    USD 2.2bn
    Less reinvestment at g/ROIC (21.3% of NOPAT)
    USD -460.8m
    Capitalised
    USD 1.7bn
    ROIC (reported)
    11.7%
    Terminal value, undiscounted
    USD 34.6bn
    Terminal value, discounted
    USD 25.0bn
    Enterprise value
    USD 32.9bn
    Less net debt
    USD 3.7bn
    Equity value
    USD 29.2bn

    Exit at 12.2x EBITDA

    Value per shareUSD 297.41

    76% of EV

    Terminal value, undiscounted
    USD 35.0bn
    Terminal value, discounted
    USD 25.2bn
    Enterprise value
    USD 33.2bn
    Less net debt
    USD 3.7bn
    Equity value
    USD 29.4bn

    Spread between methods: 1%.

    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%
    5.54%422.00456.12501.22563.78656.64
    6.54%333.05350.69372.52400.31437.02
    7.54%273.51283.24294.76308.67325.86
    8.54%230.86236.35242.66249.98258.63
    9.54%198.79201.86205.28209.13213.52

    Outlined: this model. Green text: above today's price of 309.98. 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 year3.1%4.3%+1.2pp
    EBIT margin20.3%21.4%+1.0pp
    Discount rate7.5%7.3%-0.2pp
    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.