ACGL
Arch Capital Group Ltd.
$96.30
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 52.7% below fair value
You pay
$96.30
Bear
$201.29
Fair
$203.53
Bull
$264.58
Bear
$201.29
+109.0%
ROTCE 15.5% → 4.00x TBV
Fair
$203.53
+111.3%
ROTCE 20.7% → 4.00x TBV
Bull
$264.58
+174.7%
ROTCE 23.8% → 4.00x TBV
Key Value Driver
ROTCE (20.7%) vs. cost of equity (6.1%)
Implied Market Multiple
1.58x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $104.00 from 34 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $203.53 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $104.00 (from 34 analysts). Our estimate is 137% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly