HFWA
Heritage Financial Corporation
$29.29
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 22.9% below fair value
You pay
$29.29
Bear
$22.11
Fair
$38.00
Bull
$47.52
Bear
$22.11
-24.5%
ROTCE 7.5% → 1.16x TBV
Fair
$38.00
+29.7%
ROTCE 10.0% → 1.99x TBV
Bull
$47.52
+62.3%
ROTCE 11.4% → 2.49x TBV
Key Value Driver
ROTCE (10.0%) vs. cost of equity (7.0%)
Implied Market Multiple
1.47x
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 $38.00 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: $24.45 (38% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $31.33 (from 14 analysts). Our estimate is 27% above the consensus -- consider that gap carefully.
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