HTGC
Hercules Capital, Inc.
$15.34
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 58.3% below fair value
You pay
$15.34
Bear
$25.78
Fair
$36.83
Bull
$47.88
Bear
$25.78
+68.1%
ROTCE 11.5% → 1.66x TBV
Fair
$36.83
+140.1%
ROTCE 15.3% → 2.50x TBV
Bull
$47.88
+212.2%
ROTCE 17.6% → 3.01x TBV
Key Value Driver
ROTCE (15.3%) vs. cost of equity (8.5%)
Implied Market Multiple
1.3x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $17.58 from 31 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $36.83 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: $31.45 (30% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $17.58 (from 31 analysts). Our estimate is 156% 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