• If you are wondering whether Willis Towers Watson is starting to look like value after a weaker share price, this breakdown focuses squarely on what the current price might be implying.
• The stock closed at US$263.54 recently, with the price up 5.6% over the last week and 4.4% over the last month, yet still down 19.2% year to date and 13.8% over the past year. That raises questions about how the market is reassessing its prospects and risk.
• Recent coverage has highlighted Willis Towers Watson's position as a large, diversified insurance broker and risk advisor, and has focused on how the company is responding to demand for risk management and benefits solutions. This context matters because shifts in investor sentiment around these themes can help explain why the share price has moved even while longer term returns over three and five years, at 21.3% and 9.1%, tell a different story.
• Simply Wall St currently assigns Willis Towers Watson a valuation score of 4 out of 6. The rest of this article will compare different ways of assessing value before finishing with a framework that can help you go beyond any single valuation model.

Approach 1: Willis Towers Watson Excess Returns Analysis

The Excess Returns model evaluates how much profit a company can produce above the return that shareholders require, then capitalizes that surplus into an estimate of intrinsic value per share.

For Willis Towers Watson, the model uses a Book Value of $84.61 per share and a Stable EPS of $21.24 per share, based on weighted future Return on Equity estimates from 4 analysts. The Average Return on Equity used in the model is 22.46%, compared with a Cost of Equity of $7.14 per share, which yields an Excess Return of $14.10 per share. The Stable Book Value input is $94.60 per share, based on estimates from 2 analysts.

Using these inputs, the Excess Returns approach produces an intrinsic value estimate of $446.45 per share. Compared with the recent share price of $263.54, this indicates the stock is 41.0% undervalued on this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests Willis Towers Watson is undervalued by 41.0%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Approach 2: Willis Towers Watson Price vs Earnings

For profitable companies, the P/E ratio is a useful shorthand because it links what you pay for each share directly to the earnings the business is already generating. It gives you a quick sense of how many dollars investors are willing to pay today for one dollar of current earnings.

What counts as a “normal” or “fair” P/E depends on expectations for future earnings and the risk investors see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk usually point to a lower P/E.

Willis Towers Watson currently trades on a P/E of 14.93x. That sits above the Insurance industry average of 10.88x, yet below the 22.54x average of its peers. Simply Wall St’s Fair Ratio for Willis Towers Watson is 11.71x. This Fair Ratio is a proprietary estimate of what the P/E might reasonably be given the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics, so it goes further than a simple comparison with peers or the broad industry.

Comparing the current 14.93x P/E to the 11.71x Fair Ratio, the stock screens as overvalued on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 21 top founder-led companies.

Upgrade Your Decision Making: Choose your Willis Towers Watson Narrative

Earlier it was mentioned that there is an even better way to understand valuation. This is where Narratives come in, giving you a simple story behind the numbers by linking your view of Willis Towers Watson to specific assumptions for future revenue, earnings and margins. This is then turned into a Fair Value that you can compare with the current price on Simply Wall St’s Community page, where Narratives are updated automatically when new information such as news or earnings arrives. Different investors can hold very different views. For example, one investor might lean toward the higher US$400 fair value based on expectations that consulting demand and AI enabled productivity support earnings. Another might anchor closer to the US$275 fair value, focusing more on risks from competition, regulation and AI driven fee pressure.

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.