Willis Towers Watson Public Limited CompanyWTWNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $518.72 per share(market-calibrated)

+71.2%

Upside to Fair Value

Current

$303.07

Pure Model

$558.83

Fair Value

$518.72

Bull Case

$710.76

Bear Case

$437.60

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $558.83.

What's Driving This Ratingfor WTW

↓

CapEx normalizing toward maintenance

Historical CapEx is 2.31% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$117M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 18.34% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.7B (25.97% margin).

→

Moderate revenue growth

Analyst consensus projects 8.10% revenue growth, fading to 2.50% by Year 10. Revenue reaches $14.4B (vs $9.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $669.23/share (26.0x terminal FCF) while exit multiple gives $448.43/share (14.8x terminal FCF). The base case averages both methods.

🎯

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 81.17% indicates efficient cash generation. FCF reaches $3.6B by Year 10 (25.10% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.62

Market Risk Premium4.50%

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

Cost of Equity (Re)7.29%

Cost of Debt

Pre-tax Cost of Debt3.41%

Tax Rate16.47%

After-tax Cost of Debt2.85%

Equity Weight (E/V)81.14%

Debt Weight (D/V)18.86%

WACC Calculation

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

WACC = (81.14% × 7.29%) + (18.86% × 2.85%)

= 6.45%

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	$10.5B	$11.9B	$12.7B	$13.4B	$14.4B
EBIT	$1.9B	$2.2B	$2.8B	$3.2B	$3.7B
Tax	$317M	$359M	$458M	$530M	$616M
NOPAT	$1.6B	$1.8B	$2.3B	$2.7B	$3.1B
+ Depreciation	$520M	$588M	$631M	$663M	$714M
- Capex	$242M	$253M	$248M	$237M	$216M
- Δ NWC	$15M	$15M	$6M	$6M	$7M
Free Cash Flow	$1.9B	$2.1B	$2.7B	$3.1B	$3.6B
Discount Factor	0.939	0.829	0.732	0.646	0.535
Present Value	$1.8B	$1.8B	$2.0B	$2.0B	$1.9B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.6B

Terminal Growth Rate2.50%

WACC6.45%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$93.9B

PV of Terminal Value$50.3B

Exit Multiple Method

Year 10 EBITDA$4.5B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$53.5B

PV of Terminal Value$28.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$19.1B

PV of Terminal Value$50.3B

Enterprise Value$69.4B

(-) Net Debt$3.8B

Equity Value$65.6B

Shares Outstanding98M

Price per Share$669.23

Exit Multiple Method

PV of Projected FCFs$19.1B

PV of Terminal Value$28.6B

Enterprise Value$47.7B

(-) Net Debt$3.8B

Equity Value$43.9B

Shares Outstanding98M

Price per Share$448.43

Pure Model Fair Value

$558.83

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%
4.45%	$766.21	$852.59	$962.73	$923.13	$885.35
5.45%	$606.61	$648.65	$704.94	$784.23	$885.35
6.45%	$505.01	$528.90	$558.83	$597.45	$649.16
7.45%	$432.95	$447.87	$465.80	$487.76	$515.28
8.45%	$378.27	$388.19	$399.79	$413.51	$430.00

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

$437.60

44.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.77

Base Case

$558.83

84.4% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.62

Bull Case

$710.76

134.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.53

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.10%

Year 3 Revenue Growth6.81%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin18.34%

Terminal EBIT Margin28.00%

Tax Rate16.47%

Historical Capex / Rev2.31%

Terminal Capex / Rev1.50%

NWC / Revenue1.92%

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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