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Aon plc (AON) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Aon plc (AON)

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Intrinsic Value (DCF)

Current$344.84
→
Intrinsic$238.79
-31%
$133.98$238.79$447.29
Market implies 22% growth for 5 years
Current price reflects execution expectations above 14% growth — not unreasonable for quality businesses.
At $345, the market prices in continued strong cash flow growth (22%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $134 → Bull $447. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →10%12%14%16%
8%$315$350$387$426
10%$191$214$239$265
12%$126$143$161$180
14%$85$98$112$127

Bull Case

  • Bull case ($447) offers 30% upside at 17% growth, 8% discount
  • Conservative 14% growth assumption is achievable based on track record

Bear Case

  • Bear case ($134) implies 61% downside at 12% growth, 12% discount
  • Price reflects 22% growth expectations vs 14% historical — high bar to clear
  • Trading 31% above base case — execution must exceed assumptions to justify
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5-Year Net Income Projection

Year 1$3.04B
Year 2$3.47B
Year 3$3.98B
Year 4$4.55B
Year 5$5.20B
Terminal$82.46B

📐 Model Inputs

Growth Rate14.4%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$2.65BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses Net Income (FCF not meaningful for insurers). See FAQ below for full methodology.

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Frequently Asked Questions

Is AON stock undervalued or overvalued?
🔴 OVERVALUED

AON trades at $344.84 vs. our DCF-derived intrinsic value of $238.79, implying -32% downside. Using a 9.5% WACC and 14.4% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($390.28) suggests limited upside.

What is AON's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.65B, projected at 14.4% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $16.81B net debt and dividing by 0.21B shares: Bear $134.97 | Base $238.79 | Bull $390.28. Current price $344.84 implies -32% to base case.

How is AON's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 14.4% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($67.55B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 25.5x.