Willis Towers Rises 18.1% in 6 Months: How to Play the Stock

Company Performance - Willis Towers Watson (WTW) shares have increased by 18.1% over the past six months, outperforming the industry growth of 9% and the S&P 500 index return of 6.8% [1][9] - The company has a solid surprise history, surpassing earnings estimates in each of the last four quarters with an average surprise of 7.34% [2] Growth Projections - The Zacks Consensus Estimate for WTW's 2025 earnings per share and revenues indicates a year-over-year increase of 9.1% and 5.5%, respectively, compared to 2024 estimates [3] Valuation - WTW is currently trading at a price-to-earnings multiple of 16.7, which is lower than the industry average of 21, indicating it is undervalued [4] Growth Strategy - The company's growth strategy focuses on improving operating margins, increasing free cash flow conversion, and driving sustainable revenue growth, particularly in Risk and Broking and Individual Marketplace [5] Segment Performance - The Health, Wealth & Career and Risk & Broking segments are performing well, supported by strong customer retention, new business growth, and geographic diversification [6] - WTW has experienced revenue growth in most operating regions for 15 consecutive quarters [6] Cash Flow and Shareholder Returns - WTW expects a year-over-year improvement in free cash flow margin in 2024, ensuring smooth cash flow [7] - The company has a five-year CAGR of 6.2% in dividends and plans to repurchase approximately $900 million in shares in 2024, subject to market conditions [10] Operational Challenges - Despite growth potential, WTW has faced rising expenses, including higher salary and incentive costs, which have led to margin contraction [11] - The trailing 12-month return on equity (ROE) of 18.5% is below the industry average of 31%, indicating inefficiency in using shareholders' funds [12]