AFG
American Financial Group, Inc.
$142.87
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 28.7% below fair value
You pay
$142.87
Bear
$155.49
Fair
$200.27
Bull
$200.27
Bear
$155.49
+8.8%
ROTCE 15.2% → 3.11x TBV
Fair
$200.27
+40.2%
ROTCE 20.2% → 4.00x TBV
Bull
$200.27
+40.2%
ROTCE 23.3% → 4.00x TBV
Adjust Assumptions
20.2%
7.6%
Key Value Driver
ROTCE (20.2%) vs. cost of equity (7.6%)
Implied Market Multiple
2.85x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (17 analysts)
$156.00
Divergence from AlphaVal
28%
Summary
With ROTCE of 20.2% vs. 7.6% cost of equity, fair P/TBV is 4.00x on $50.07 tangible book, implying $200.27 per share. DDM cross-check: $107.06.
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.
Dividend-based valuation: $107.06 (47% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $156.00 (from 17 analysts). Our estimate is 28% 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