Intrinsic value of Willis Towers Watson - WLTW

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$145.36

  Intrinsic Value

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  Value-price divergence*

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$145.36

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WLTW stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 19.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  105.98
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  7,887
  6,126
  9,465
  14,155
  20,539
  28,977
  39,837
  53,473
  70,213
  90,347
  114,116
  141,706
  173,249
  208,823
  248,459
  292,143
  339,833
  391,459
  446,938
  506,180
  569,097
  635,606
  705,637
  779,138
  856,075
  936,436
  1,020,232
  1,107,499
  1,198,294
  1,292,701
  1,390,824
Variable operating expenses, $m
 
  4,861
  7,306
  10,741
  15,416
  21,597
  29,550
  39,537
  51,798
  66,544
  83,952
  103,786
  126,888
  152,943
  181,972
  213,966
  248,894
  286,705
  327,339
  370,728
  416,808
  465,519
  516,811
  570,643
  626,992
  685,848
  747,221
  811,135
  877,634
  946,778
  1,018,643
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,336
  4,861
  7,306
  10,741
  15,416
  21,597
  29,550
  39,537
  51,798
  66,544
  83,952
  103,786
  126,888
  152,943
  181,972
  213,966
  248,894
  286,705
  327,339
  370,728
  416,808
  465,519
  516,811
  570,643
  626,992
  685,848
  747,221
  811,135
  877,634
  946,778
  1,018,643
Operating income, $m
  551
  1,266
  2,159
  3,414
  5,122
  7,380
  10,287
  13,935
  18,415
  23,803
  30,163
  37,920
  46,361
  55,881
  66,487
  78,177
  90,938
  104,753
  119,599
  135,453
  152,289
  170,086
  188,827
  208,495
  229,083
  250,588
  273,011
  296,364
  320,660
  345,923
  372,181
EBITDA, $m
  1,320
  1,716
  2,652
  3,966
  5,755
  8,119
  11,162
  14,982
  19,672
  25,313
  31,973
  39,703
  48,541
  58,508
  69,613
  81,853
  95,214
  109,679
  125,223
  141,822
  159,450
  178,084
  197,706
  218,299
  239,855
  262,371
  285,849
  310,299
  335,738
  362,189
  389,682
Interest expense (income), $m
  143
  123
  558
  1,189
  2,075
  3,282
  4,877
  6,930
  9,508
  12,673
  16,479
  20,972
  26,188
  32,151
  38,876
  46,369
  54,627
  63,643
  73,402
  83,890
  95,089
  106,983
  119,556
  132,795
  146,690
  161,235
  176,426
  192,267
  208,765
  225,929
  243,776
Earnings before tax, $m
  340
  1,143
  1,602
  2,225
  3,047
  4,098
  5,409
  7,005
  8,907
  11,130
  13,684
  16,948
  20,173
  23,730
  27,611
  31,808
  36,311
  41,111
  46,197
  51,562
  57,199
  63,103
  69,270
  75,700
  82,393
  89,353
  96,585
  104,096
  111,896
  119,994
  128,405
Tax expense, $m
  -96
  309
  432
  601
  823
  1,107
  1,460
  1,891
  2,405
  3,005
  3,695
  4,576
  5,447
  6,407
  7,455
  8,588
  9,804
  11,100
  12,473
  13,922
  15,444
  17,038
  18,703
  20,439
  22,246
  24,125
  26,078
  28,106
  30,212
  32,399
  34,669
Net income, $m
  420
  834
  1,169
  1,625
  2,224
  2,992
  3,949
  5,114
  6,502
  8,125
  9,990
  12,372
  14,726
  17,323
  20,156
  23,220
  26,507
  30,011
  33,724
  37,641
  41,756
  46,065
  50,567
  55,261
  60,147
  65,228
  70,507
  75,990
  81,684
  87,596
  93,736

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  870
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  30,253
  29,313
  45,288
  67,729
  98,271
  138,646
  190,607
  255,850
  335,948
  432,283
  546,008
  678,019
  828,943
  999,155
  1,188,797
  1,397,814
  1,625,993
  1,873,008
  2,138,459
  2,421,916
  2,722,953
  3,041,176
  3,376,254
  3,727,933
  4,096,052
  4,480,555
  4,881,495
  5,299,038
  5,733,466
  6,185,172
  6,654,662
Adjusted assets (=assets-cash), $m
  29,383
  29,313
  45,288
  67,729
  98,271
  138,646
  190,607
  255,850
  335,948
  432,283
  546,008
  678,019
  828,943
  999,155
  1,188,797
  1,397,814
  1,625,993
  1,873,008
  2,138,459
  2,421,916
  2,722,953
  3,041,176
  3,376,254
  3,727,933
  4,096,052
  4,480,555
  4,881,495
  5,299,038
  5,733,466
  6,185,172
  6,654,662
Revenue / Adjusted assets
  0.268
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
Average production assets, $m
  3,443
  2,089
  3,228
  4,827
  7,004
  9,881
  13,584
  18,234
  23,943
  30,808
  38,913
  48,322
  59,078
  71,209
  84,724
  99,621
  115,883
  133,487
  152,406
  172,608
  194,062
  216,742
  240,622
  265,686
  291,922
  319,325
  347,899
  377,657
  408,618
  440,811
  474,271
Working capital, $m
  422
  251
  388
  580
  842
  1,188
  1,633
  2,192
  2,879
  3,704
  4,679
  5,810
  7,103
  8,562
  10,187
  11,978
  13,933
  16,050
  18,324
  20,753
  23,333
  26,060
  28,931
  31,945
  35,099
  38,394
  41,830
  45,407
  49,130
  53,001
  57,024
Total debt, $m
  3,865
  12,393
  26,419
  46,122
  72,938
  108,388
  154,009
  211,293
  281,618
  366,200
  466,051
  581,956
  714,468
  863,914
  1,030,420
  1,213,937
  1,414,278
  1,631,157
  1,864,223
  2,113,098
  2,377,408
  2,656,809
  2,951,007
  3,259,781
  3,582,990
  3,920,583
  4,272,608
  4,639,211
  5,020,639
  5,417,237
  5,829,449
Total liabilities, $m
  20,188
  25,737
  39,763
  59,466
  86,282
  121,732
  167,353
  224,637
  294,962
  379,544
  479,395
  595,300
  727,812
  877,258
  1,043,764
  1,227,281
  1,427,622
  1,644,501
  1,877,567
  2,126,442
  2,390,752
  2,670,153
  2,964,351
  3,273,125
  3,596,334
  3,933,927
  4,285,952
  4,652,555
  5,033,983
  5,430,581
  5,842,793
Total equity, $m
  10,065
  3,576
  5,525
  8,263
  11,989
  16,915
  23,254
  31,214
  40,986
  52,739
  66,613
  82,718
  101,131
  121,897
  145,033
  170,533
  198,371
  228,507
  260,892
  295,474
  332,200
  371,024
  411,903
  454,808
  499,718
  546,628
  595,542
  646,483
  699,483
  754,591
  811,869
Total liabilities and equity, $m
  30,253
  29,313
  45,288
  67,729
  98,271
  138,647
  190,607
  255,851
  335,948
  432,283
  546,008
  678,018
  828,943
  999,155
  1,188,797
  1,397,814
  1,625,993
  1,873,008
  2,138,459
  2,421,916
  2,722,952
  3,041,177
  3,376,254
  3,727,933
  4,096,052
  4,480,555
  4,881,494
  5,299,038
  5,733,466
  6,185,172
  6,654,662
Debt-to-equity ratio
  0.384
  3.470
  4.780
  5.580
  6.080
  6.410
  6.620
  6.770
  6.870
  6.940
  7.000
  7.040
  7.060
  7.090
  7.100
  7.120
  7.130
  7.140
  7.150
  7.150
  7.160
  7.160
  7.160
  7.170
  7.170
  7.170
  7.170
  7.180
  7.180
  7.180
  7.180
Adjusted equity ratio
  0.313
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  420
  834
  1,169
  1,625
  2,224
  2,992
  3,949
  5,114
  6,502
  8,125
  9,990
  12,372
  14,726
  17,323
  20,156
  23,220
  26,507
  30,011
  33,724
  37,641
  41,756
  46,065
  50,567
  55,261
  60,147
  65,228
  70,507
  75,990
  81,684
  87,596
  93,736
Depreciation, amort., depletion, $m
  769
  451
  493
  552
  632
  738
  875
  1,047
  1,257
  1,511
  1,810
  1,783
  2,180
  2,628
  3,126
  3,676
  4,276
  4,926
  5,624
  6,369
  7,161
  7,998
  8,879
  9,804
  10,772
  11,783
  12,838
  13,936
  15,078
  16,266
  17,501
Funds from operations, $m
  812
  1,285
  1,662
  2,176
  2,856
  3,730
  4,824
  6,160
  7,759
  9,636
  11,799
  14,155
  16,906
  19,950
  23,282
  26,896
  30,783
  34,937
  39,348
  44,010
  48,917
  54,063
  59,446
  65,065
  70,919
  77,011
  83,345
  89,926
  96,762
  103,862
  111,237
Change in working capital, $m
  -108
  94
  137
  192
  262
  346
  445
  559
  686
  825
  975
  1,131
  1,293
  1,459
  1,625
  1,791
  1,955
  2,117
  2,275
  2,429
  2,580
  2,727
  2,871
  3,014
  3,154
  3,295
  3,436
  3,578
  3,723
  3,871
  4,023
Cash from operations, $m
  920
  1,563
  1,525
  1,984
  2,595
  3,384
  4,378
  5,601
  7,073
  8,810
  10,825
  13,024
  15,613
  18,492
  21,657
  25,105
  28,828
  32,820
  37,073
  41,581
  46,337
  51,336
  56,575
  62,051
  67,765
  73,716
  79,909
  86,348
  93,039
  99,991
  107,213
Maintenance CAPEX, $m
  0
  -48
  -77
  -119
  -178
  -258
  -365
  -501
  -673
  -883
  -1,137
  -1,436
  -1,783
  -2,180
  -2,628
  -3,126
  -3,676
  -4,276
  -4,926
  -5,624
  -6,369
  -7,161
  -7,998
  -8,879
  -9,804
  -10,772
  -11,783
  -12,838
  -13,936
  -15,078
  -16,266
New CAPEX, $m
  -303
  -784
  -1,139
  -1,599
  -2,177
  -2,878
  -3,703
  -4,650
  -5,708
  -6,866
  -8,105
  -9,408
  -10,756
  -12,131
  -13,516
  -14,896
  -16,262
  -17,604
  -18,918
  -20,202
  -21,455
  -22,679
  -23,881
  -25,064
  -26,235
  -27,403
  -28,575
  -29,758
  -30,961
  -32,193
  -33,460
Cash from investing activities, $m
  195
  -832
  -1,216
  -1,718
  -2,355
  -3,136
  -4,068
  -5,151
  -6,381
  -7,749
  -9,242
  -10,844
  -12,539
  -14,311
  -16,144
  -18,022
  -19,938
  -21,880
  -23,844
  -25,826
  -27,824
  -29,840
  -31,879
  -33,943
  -36,039
  -38,175
  -40,358
  -42,596
  -44,897
  -47,271
  -49,726
Free cash flow, $m
  1,115
  731
  309
  266
  240
  248
  311
  450
  692
  1,061
  1,583
  2,180
  3,074
  4,181
  5,514
  7,082
  8,890
  10,939
  13,229
  15,755
  18,513
  21,496
  24,696
  28,108
  31,725
  35,541
  39,551
  43,753
  48,143
  52,721
  57,487
Issuance/(repayment) of debt, $m
  -128
  9,659
  14,027
  19,703
  26,816
  35,449
  45,621
  57,284
  70,325
  84,582
  99,851
  115,905
  132,511
  149,446
  166,506
  183,517
  200,341
  216,879
  233,066
  248,875
  264,310
  279,400
  294,199
  308,774
  323,209
  337,593
  352,025
  366,603
  381,427
  396,598
  412,212
Issuance/(repurchase) of shares, $m
  -333
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -563
  9,659
  14,027
  19,703
  26,816
  35,449
  45,621
  57,284
  70,325
  84,582
  99,851
  115,905
  132,511
  149,446
  166,506
  183,517
  200,341
  216,879
  233,066
  248,875
  264,310
  279,400
  294,199
  308,774
  323,209
  337,593
  352,025
  366,603
  381,427
  396,598
  412,212
Total cash flow (excl. dividends), $m
  537
  10,390
  14,336
  19,968
  27,056
  35,698
  45,932
  57,734
  71,017
  85,643
  101,434
  118,085
  135,585
  153,627
  172,020
  190,599
  209,231
  227,818
  246,295
  264,631
  282,823
  300,896
  318,895
  336,882
  354,934
  373,134
  391,576
  410,356
  429,570
  449,319
  469,699
Retained Cash Flow (-), $m
  -7,836
  -1,347
  -1,949
  -2,738
  -3,726
  -4,926
  -6,339
  -7,960
  -9,772
  -11,753
  -13,875
  -16,105
  -18,413
  -20,766
  -23,136
  -25,500
  -27,838
  -30,136
  -32,385
  -34,582
  -36,726
  -38,823
  -40,880
  -42,905
  -44,911
  -46,909
  -48,915
  -50,940
  -53,000
  -55,108
  -57,278
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  9,043
  12,387
  17,231
  23,330
  30,772
  39,593
  49,774
  61,245
  73,890
  87,559
  101,979
  117,172
  132,861
  148,883
  165,099
  181,393
  197,682
  213,910
  230,049
  246,097
  262,073
  278,016
  293,978
  310,023
  326,225
  342,662
  359,415
  376,570
  394,210
  412,422
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  8,342
  10,460
  13,210
  16,095
  18,925
  21,490
  23,589
  25,057
  25,782
  25,723
  24,881
  23,400
  21,387
  19,004
  16,425
  13,810
  11,297
  8,991
  6,959
  5,238
  3,832
  2,723
  1,878
  1,256
  814
  511
  310
  181
  103
  56
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Willis Towers Watson Public Limited Company operates as an advisory, broking, and solutions company worldwide. The company operates through four business segments: Corporate Risk and Broking; Exchange Solutions; Human Capital and Benefits; and Investment, Risk, and Reinsurance. It designs and delivers solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Willis Towers Watson Public Limited serves multinational corporations, middle-market companies in various industries, public institutions, and individual clients. The company was formerly known as Willis Group Holdings Public Limited Company and changed its name to Willis Towers Watson Public Limited Company in January 2016. Willis Towers Watson Public Limited Company was founded in 1828 and is based in London, the United Kingdom.

FINANCIAL RATIOS  of  Willis Towers Watson (WLTW)

Valuation Ratios
P/E Ratio 47.2
Price to Sales 2.5
Price to Book 2
Price to Tangible Book
Price to Cash Flow 21.5
Price to Free Cash Flow 32.1
Growth Rates
Sales Growth Rate 106%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 91.8%
Cap. Spend. - 3 Yr. Gr. Rate 20.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.8
LT Debt to Equity 33.4%
Total Debt to Equity 38.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 15.9%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate -28.2%
Eff/ Tax Rate - 3 Yr. Avg. -2.4%
Payout Ratio 47.4%

WLTW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WLTW stock intrinsic value calculation we used $3829 million for the last fiscal year's total revenue generated by Willis Towers Watson. The default revenue input number comes from 2016 income statement of Willis Towers Watson. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WLTW stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.4%, whose default value for WLTW is calculated based on our internal credit rating of Willis Towers Watson, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Willis Towers Watson.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WLTW stock the variable cost ratio is equal to 83%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WLTW stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.5% for Willis Towers Watson.

Corporate tax rate of 27% is the nominal tax rate for Willis Towers Watson. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WLTW stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WLTW are equal to 34.1%.

Life of production assets of 27.1 years is the average useful life of capital assets used in Willis Towers Watson operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WLTW is equal to 4.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2229 million for Willis Towers Watson - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 136.523 million for Willis Towers Watson is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Willis Towers Watson at the current share price and the inputted number of shares is $19.8 billion.


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COMPANY NEWS

▶ Willis Towers Watson Announces Regular Quarterly Dividend   [May-17-17 04:30PM  GlobeNewswire]
▶ Willis Towers Watson beats Street 1Q forecasts   [06:22AM  Associated Press]
▶ [$$] Market Talk: Daily Analysis Roundup   [Apr-21-17 04:48PM  The Wall Street Journal]
▶ Willis Towers Watson announces program for RIMS 2017   [Mar-20-17 09:05AM  GlobeNewswire]
▶ Highly Regarded Value Investors New Stock Moves   [10:14AM  at Insider Monkey]
▶ Investors look for ways to work assets harder   [Mar-02-17 09:19AM  GlobeNewswire]
▶ MOVES-SocGen, eVestment, Marketaxess   [Feb-27-17 04:25PM  Reuters]
▶ Willis Towers Watson launches Asset Management Exchange   [Feb-21-17 09:05AM  GlobeNewswire]
Stock chart of WLTW Financial statements of WLTW Annual reports of WLTW
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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