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Willis Towers Watson (WTW) Stock Could Still Be Undervalued Despite Its 43% Gain

Simply Wall St · 1d ago

Willis Towers Watson has seen its share price move around lately, yet the bigger story for investors is whether the current valuation is really supported by the returns the business earns on its capital. With that in mind, the key issue is how today’s price lines up with what the company’s capital allocation can justify over time.

  • Over the past 3 years the stock has delivered a 43.4% gain, which puts real weight on the question of whether those returns on capital can sustain that kind of step up in equity value.
  • Fresh agreements to roll out WTW’s Radar analytics with Zurich Insurance and partnerships around agentic AI suggest management is trying to deepen fee pools and improve pricing power. This can feed directly into how efficiently the firm turns invested capital into profit.
  • Prefer to judge Willis Towers Watson on earnings? See why Willis Towers Watson's 17.4x P/E tells a different valuation story.

The stock’s next move may depend on whether the returns Willis Towers Watson earns on its capital are strong enough to support the valuation implied by today’s share price.

If you want a wider lens on companies where capital efficiency is a key filter, a focused stock screen is a useful next step via 30 high quality undervalued stocks

Is Willis Towers Watson Still Cheap on Excess Returns?

The Excess Returns model looks at how much profit Willis Towers Watson can earn above its cost of equity over time. On this view, the firm is treated as a financial engine that turns book equity into earnings, then asks how much of that is truly surplus for shareholders.

For Willis Towers Watson, the model uses a Book Value of $82.66 per share and a Stable EPS of $22.37 per share, based on weighted future Return on Equity estimates from 4 analysts. With an Average Return on Equity of 23.58% and a Cost of Equity of $7.26 per share, the implied Excess Return of $15.11 per share suggests the business is modeled to generate profits that are materially above its capital charge, supported by a Stable Book Value projection of $94.87 per share from 2 analyst sources. Because of the expanded Radar agreement with Zurich Insurance, the market may be slow to fully reflect the potential pay-off from WTW’s tech heavy risk and pricing platform in the current share price of $293.63, while the Excess Returns model puts its estimated intrinsic value substantially above the current share price. Find out what Willis Towers Watson could be worth using our Excess Returns estimate.

The Willis Towers Watson Narrative: What Would Justify Today's Price?

Willis Towers Watson’s valuation puzzle only really comes into focus once you spell out which paths for future growth, profitability and earnings would justify a much higher or much lower share price than today, and that is exactly what Simply Wall St Narratives on the Community page are designed to map out. Each narrative ties its number to a clear view on where Willis Towers Watson's growth, margins and risk profile might head next, which gives you something concrete to revisit as fresh results and new information come through.

One of the top community narratives on Willis Towers Watson: 22% undervalued

"Acceleration of the Propel AI Acceleration Plan, which targets about US$400m in run-rate savings and higher enterprise and segment margin levels by 2028…”

Discover why this Narrative puts Willis Towers Watson at 22% undervalued.

One more Willis Towers Watson factor to check before you move on

Balance sheets and valuation models only tell part of the story, because the people steering Willis Towers Watson and how they are rewarded can tilt long term outcomes in very different directions. See who runs Willis Towers Watson and how they are paid.

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.