- If you are wondering whether Willis Towers Watson at around US$293 per share is priced fairly or offering value, this breakdown is designed to help you make sense of the numbers.
- The stock is roughly flat over the last week with a 0.7% gain, while the 1 year return of a 12.0% decline and a 10.1% decline year to date contrasts with a 34.1% gain over 3 years and a 33.6% gain over 5 years.
- Recent attention on the company has focused on how a global insurance broker like Willis Towers Watson is positioned as clients reassess risk, coverage needs and advisory support. This helps frame how investors react to the share price. Broader sector discussions about risk management and insurance pricing have also kept the stock on the radar for those watching long term trends in the industry.
- On Simply Wall St's valuation checklist, Willis Towers Watson scores 2 out of 6. The next sections will compare different valuation approaches before finishing with a way to think about value that goes beyond just the headline metrics.
Willis Towers Watson scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Willis Towers Watson Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, then converts that into a value per share today.
For Willis Towers Watson, the model starts with a Book Value of $83.89 per share and a Stable EPS of $10.75 per share, based on the median return on equity from the past 5 years. The Average Return on Equity is 11.30%, while the Cost of Equity is $7.06 per share. The difference between these, an Excess Return of $3.69 per share, represents the value created above the required return.
The Stable Book Value used in the model is $95.15 per share, drawn from weighted future book value estimates from 2 analysts. Putting these inputs together, the Excess Returns framework arrives at an intrinsic value of about $187.34 per share.
Compared with the recent share price around $293, this implies the stock is roughly 56.6% overvalued on this model. For readers focusing on this method alone, Willis Towers Watson does not screen as a value opportunity at current levels.
Result: OVERVALUED
Our Excess Returns analysis suggests Willis Towers Watson may be overvalued by 56.6%. Discover 55 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Willis Towers Watson Price vs Earnings
The P/E ratio is a common way to value profitable companies because it links what you pay for each share to the earnings that support that price. In general, higher growth expectations or lower perceived risk can support a higher P/E, while slower growth or higher risk tends to justify a lower multiple.
Willis Towers Watson currently trades on a P/E of 17.29x. This sits above the Insurance industry average P/E of 10.79x and below the peer group average of 24.55x, so the market is pricing the stock between the broader sector and closer peers.
Simply Wall St also calculates a proprietary “Fair Ratio” for the P/E, which is 13.30x for Willis Towers Watson. This Fair Ratio reflects factors such as earnings growth, profit margins, industry, market cap and company specific risks, so it can be more tailored than a simple comparison with industry or peer averages.
Comparing the current P/E of 17.29x with the Fair Ratio of 13.30x suggests the shares trade above the level implied by those fundamentals, which indicates that the stock appears overvalued on this metric.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Willis Towers Watson Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories you create about Willis Towers Watson that link your view of its future revenue, earnings and margins to a forecast, a fair value and, on Simply Wall St's Community page, an easy comparison between that fair value and the current price. Each Narrative updates automatically when fresh news or earnings arrive. This allows, for example, one investor who thinks the shares are worth closer to the most bullish analyst target of US$408 and another who anchors nearer the most cautious target of US$305 to both express their views clearly and see how those different stories translate into very different investment decisions.
Do you think there's more to the story for Willis Towers Watson? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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