HFWA
Heritage Financial Corporation
$27.18
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 27.2% below fair value
You pay
$27.18
Bear
$21.72
Fair
$37.31
Bull
$46.67
Bear
$21.72
-20.1%
ROTCE 7.5% → 1.13x TBV
Fair
$37.31
+37.3%
ROTCE 10.0% → 1.94x TBV
Bull
$46.67
+71.7%
ROTCE 11.4% → 2.43x TBV
Key Value Driver
ROTCE (10.0%) vs. cost of equity (7.1%)
Implied Market Multiple
1.36x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $31.33 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $37.31 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.
Dividend-based valuation: $24.06 (38% 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