DGICA
Donegal Group Inc.
$18.19
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 70.4% below fair value
You pay
$18.19
Bear
$50.07
Fair
$61.36
Bull
$61.36
Bear
$50.07
+175.3%
ROTCE 10.5% → 3.26x TBV
Fair
$61.36
+237.3%
ROTCE 14.0% → 4.00x TBV
Bull
$61.36
+237.3%
ROTCE 16.1% → 4.00x TBV
Adjust Assumptions
14.0%
6.0%
Key Value Driver
ROTCE (14.0%) vs. cost of equity (6.0%)
Implied Market Multiple
1.19x
Summary
With ROTCE of 14.0% vs. 6.0% cost of equity, fair P/TBV is 4.00x on $15.34 tangible book, implying $61.36 per share. DDM cross-check: $24.92.
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: $24.92 (59% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
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