ALLY
Ally Financial Inc.
$42.92
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 0.5% below fair value
You pay
$42.92
Bear
$30.19
Fair
$43.12
Bull
$56.06
Bear
$30.19
-29.7%
ROTCE 4.1% → 0.30x TBV
Fair
$43.12
+0.5%
ROTCE 5.5% → 0.30x TBV
Bull
$56.06
+30.6%
ROTCE 6.3% → 0.37x TBV
Key Value Driver
ROTCE (5.5%) vs. cost of equity (10.2%)
Implied Market Multiple
0.85x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $54.43 from 38 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $43.12 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.
Return on equity (5.5%) is below the minimum investors require (10.2%). This means the bank is worth less than the net assets on its books.
Dividend-based valuation: $12.91 (66% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $54.43 (from 38 analysts). Our estimate is 30% below 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