FMAO
Farmers & Merchants Bancorp, Inc.
$35.17
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Overvalued
Trading 3.4% above fair value
You pay
$35.17
Bear
$21.21
Fair
$34.01
Bull
$41.68
Bear
$21.21
-39.7%
ROTCE 8.9% → 1.05x TBV
Fair
$34.01
-3.3%
ROTCE 11.9% → 1.68x TBV
Bull
$41.68
+18.5%
ROTCE 13.7% → 2.05x TBV
Adjust Assumptions
11.9%
8.7%
Key Value Driver
ROTCE (11.9%) vs. cost of equity (8.7%)
Implied Market Multiple
1.73x
Summary
With ROTCE of 11.9% vs. 8.7% cost of equity, fair P/TBV is 1.68x on $20.29 tangible book, implying $34.01 per share. DDM cross-check: $18.46.
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: $18.46 (46% 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