Willis Towers Watson

Willis Towers Watson PLC earns a 5-star quantitative star rating, illustrating our stance that this share class offers a compelling opportunity for investors. The stock currently trades at a 19% discount to our quantitative fair value estimate of $357.12 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The firm's profitability bolsters our valuation estimate. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. Reflecting the firm's profitability is its earnings yield of 6.2%, which falls in the top 40% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, which contributes to our view that shares are undervalued.

The firm's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to revenue ratio of 3.2, for example, sits in the top 45% compared with peers globally. The company trades at a premium on an enterprise value/sales basis, justifiably so. We believe that future free cash flow growth will more than justify the current multiple, which further promotes our favorable price/fair value ratio.

The company's narrow economic moat rating suggests it should be able to maintain robust profitability for a decade or longer before competition erodes its advantage. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.