HTGC
Hercules Capital, Inc.
$16.07
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 64.4% below fair value
You pay
$16.07
Bear
$31.56
Fair
$45.08
Bull
$58.61
Bear
$31.56
+96.4%
ROTCE 11.5% → 1.67x TBV
Fair
$45.08
+180.5%
ROTCE 15.3% → 2.52x TBV
Bull
$58.61
+264.7%
ROTCE 17.6% → 3.03x TBV
Adjust Assumptions
15.3%
8.5%
Key Value Driver
ROTCE (15.3%) vs. cost of equity (8.5%)
Implied Market Multiple
1.36x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (31 analysts)
$15.50
Divergence from AlphaVal
191%
Summary
With ROTCE of 15.3% vs. 8.5% cost of equity, fair P/TBV is 2.52x on $11.84 tangible book, implying $45.08 per share. DDM cross-check: $26.08.
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: $26.08 (42% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $15.50 (from 31 analysts). Our estimate is 191% 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