HTBK
Heritage Commerce Corp
$13.45
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 18.5% above fair value
You pay
$13.45
Bear
$6.20
Fair
$11.35
Bull
$14.43
Bear
$6.20
-53.9%
ROTCE 6.7% → 0.66x TBV
Fair
$11.35
-15.6%
ROTCE 8.9% → 1.21x TBV
Bull
$14.43
+7.3%
ROTCE 10.3% → 1.54x TBV
Key Value Driver
ROTCE (8.9%) vs. cost of equity (8.1%)
Implied Market Multiple
1.54x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $14.50 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $11.35 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.
Wall Street's average price target is $14.50 (from 12 analysts). Our estimate is 27% below 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