AMBC
Ambac Financial Group, Inc.
$8.29
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 85.0% above fair value
Bear
$4.48
-46.0%
ROTCE 4.0% → 0.30x TBV
Fair
$4.48
-46.0%
ROTCE -36.6% → 0.30x TBV
Bull
$4.48
-46.0%
ROTCE -42.0% → 0.30x TBV
Adjust Assumptions
-36.6%
9.1%
Key Value Driver
ROTCE (-36.6%) vs. cost of equity (9.1%)
Implied Market Multiple
0.56x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (6 analysts)
$14.00
Divergence from AlphaVal
68%
Summary
With ROTCE of -36.6% vs. 9.1% cost of equity, fair P/TBV is 0.30x on $14.93 tangible book, implying $4.48 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 (-36.6%) is below the minimum investors require (9.1%). This means the bank is worth less than the net assets on its books.
Wall Street's average price target is $14.00 (from 6 analysts). Our estimate is 68% 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