CATY
Cathay General Bancorp
$57.27
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 10.3% below fair value
You pay
$57.27
Bear
$44.72
Fair
$63.88
Bull
$83.04
Bear
$44.72
-21.9%
ROTCE 9.3% → 1.05x TBV
Fair
$63.88
+11.5%
ROTCE 12.4% → 1.66x TBV
Bull
$83.04
+45.0%
ROTCE 14.2% → 2.03x TBV
Key Value Driver
ROTCE (12.4%) vs. cost of equity (9.0%)
Implied Market Multiple
1.51x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $47.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $63.88 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.
Dividend-based valuation: $19.70 (71% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $47.00 (from 13 analysts). Our estimate is 45% 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