HFWA
Heritage Financial Corporation
$27.57
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 14.6% below fair value
You pay
$27.57
Bear
$18.80
Fair
$32.30
Bull
$40.40
Bear
$18.80
-31.8%
ROTCE 7.5% → 1.14x TBV
Fair
$32.30
+17.2%
ROTCE 10.0% → 1.96x TBV
Bull
$40.40
+46.5%
ROTCE 11.4% → 2.45x TBV
Adjust Assumptions
10.0%
7.0%
Key Value Driver
ROTCE (10.0%) vs. cost of equity (7.0%)
Implied Market Multiple
1.67x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (14 analysts)
$32.33
Divergence from AlphaVal
0%
Summary
With ROTCE of 10.0% vs. 7.0% cost of equity, fair P/TBV is 1.96x on $16.46 tangible book, implying $32.30 per share. DDM cross-check: $24.27.
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