HFWA
Heritage Financial Corporation
$29.13
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 11.1% below fair value
You pay
$29.13
Bear
$19.08
Fair
$32.78
Bull
$41.00
Bear
$19.08
-34.5%
ROTCE 7.5% → 1.16x TBV
Fair
$32.78
+12.5%
ROTCE 10.0% → 1.99x TBV
Bull
$41.00
+40.7%
ROTCE 11.4% → 2.49x TBV
Adjust Assumptions
10.0%
7.0%
Key Value Driver
ROTCE (10.0%) vs. cost of equity (7.0%)
Implied Market Multiple
1.77x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (14 analysts)
$32.00
Divergence from AlphaVal
2%
Summary
With ROTCE of 10.0% vs. 7.0% cost of equity, fair P/TBV is 1.99x on $16.46 tangible book, implying $32.78 per share. DDM cross-check: $24.53.
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: $24.53 (25% 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