FSBC
Five Star Bancorp
$42.35
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 24.1% below fair value
You pay
$42.35
Bear
$36.18
Fair
$55.82
Bull
$67.61
Bear
$36.18
-14.6%
ROTCE 10.4% → 1.96x TBV
Fair
$55.82
+31.8%
ROTCE 13.8% → 3.02x TBV
Bull
$67.61
+59.6%
ROTCE 15.9% → 3.65x TBV
Adjust Assumptions
13.8%
7.3%
Key Value Driver
ROTCE (13.8%) vs. cost of equity (7.3%)
Implied Market Multiple
2.29x
Summary
With ROTCE of 13.8% vs. 7.3% cost of equity, fair P/TBV is 3.02x on $18.50 tangible book, implying $55.82 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.
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