Marsh & McLennan Companies, Inc.MMCNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $221.11 per share(market-calibrated)

+21.0%

Upside to Fair Value

Current

$182.70

Pure Model

$232.38

Fair Value

$221.11

Bull Case

$293.52

Bear Case

$181.46

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

2.00%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $232.38.

What's Driving This Ratingfor MMC

✓

CapEx already efficient

CapEx at 1.41% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 22.91% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $10.1B (26.93% margin).

→

Moderate revenue growth

Analyst consensus projects 4.86% revenue growth, fading to 2.50% by Year 10. Revenue reaches $37.6B (vs $27.0B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 73.71% indicates efficient cash generation. FCF reaches $8.2B by Year 10 (21.95% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.75

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.88%

Cost of Debt

Pre-tax Cost of Debt2.94%

Tax Rate23.56%

After-tax Cost of Debt2.25%

Equity Weight (E/V)80.70%

Debt Weight (D/V)19.30%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (80.70% × 7.88%) + (19.30% × 2.25%)

= 6.80%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$28.3B	$31.2B	$33.2B	$34.9B	$37.6B
EBIT	$6.5B	$7.2B	$8.2B	$9.0B	$10.1B
Tax	$1.5B	$1.7B	$1.9B	$2.1B	$2.4B
NOPAT	$5.0B	$5.5B	$6.3B	$6.9B	$7.7B
+ Depreciation	$804M	$888M	$944M	$992M	$1.1B
- Capex	$398M	$440M	$468M	$491M	$529M
- Δ NWC	$41M	$45M	$25M	$26M	$28M
Free Cash Flow	$5.3B	$5.9B	$6.7B	$7.4B	$8.2B
Discount Factor	0.936	0.821	0.720	0.631	0.518
Present Value	$5.0B	$4.8B	$4.8B	$4.7B	$4.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$8.2B

Terminal Growth Rate2.50%

WACC6.80%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$196.8B

PV of Terminal Value$102.0B

Exit Multiple Method

Year 10 EBITDA$11.2B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$134.3B

PV of Terminal Value$69.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$47.1B

PV of Terminal Value$102.0B

Enterprise Value$149.1B

(-) Net Debt$18.8B

Equity Value$130.3B

Shares Outstanding491M

Price per Share$265.36

Exit Multiple Method

PV of Projected FCFs$47.1B

PV of Terminal Value$69.6B

Enterprise Value$116.7B

(-) Net Debt$18.8B

Equity Value$97.9B

Shares Outstanding491M

Price per Share$199.41

Pure Model Fair Value

$232.38

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.80%	$315.60	$345.49	$388.40	$416.45	$398.76
5.80%	$253.51	$269.02	$289.23	$316.67	$356.06
6.80%	$211.96	$221.11	$232.38	$246.63	$265.20
7.80%	$181.51	$187.37	$194.33	$202.74	$213.11
8.80%	$157.87	$161.84	$166.43	$171.82	$178.22

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$181.46

-0.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.94

Base Case

$232.38

27.2% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.75

Bull Case

$293.52

60.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.64

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.86%

Year 3 Revenue Growth4.89%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin22.91%

Terminal EBIT Margin28.00%

Tax Rate23.56%

Historical Capex / Rev1.41%

NWC / Revenue3.11%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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