DGICA
Donegal Group Inc.
$17.34
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 71.9% below fair value
You pay
$17.34
Bear
$50.34
Fair
$61.69
Bull
$61.69
Bear
$50.34
+190.3%
ROTCE 10.5% → 3.26x TBV
Fair
$61.69
+255.7%
ROTCE 14.0% → 4.00x TBV
Bull
$61.69
+255.7%
ROTCE 16.1% → 4.00x TBV
Key Value Driver
ROTCE (14.0%) vs. cost of equity (6.0%)
Implied Market Multiple
1.12x
Summary
With ROTCE of 14.0% vs. 6.0% cost of equity, fair P/TBV is 4.00x on $15.42 tangible book, implying $61.69 per share. DDM cross-check: $23.67.
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: $23.67 (62% 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